The ‘dementia tax’ explained: do you have to pay for dementia care?

The ‘dementia tax’ is a label for the fact that dementia care is mostly social care, not NHS healthcare, so in England it is means-tested rather than free. Many families pay for long-term care until savings and, for a care home, property fall to the capital limits, unless the person qualifies for NHS continuing healthcare. There is no separate tax. The phrase describes who pays.

At a glance

• Dementia is a health condition, but most day-to-day dementia care (help at home, a care home place) is arranged and charged as social care.
• In England, the council helps with costs only if capital is below £23,250; between £14,250 and £23,250 the person contributes from income and assumed tariff income.
• NHS continuing healthcare and NHS-funded nursing care are free of the means test, but a diagnosis alone does not qualify anyone.
• No cap on lifetime care costs is in force in England: the planned cap was cancelled in July 2024.
• A free needs assessment, Attendance Allowance and an early look at continuing healthcare are the main ways to limit costs.

Where does the term ‘dementia tax’ come from?

The phrase became widely used during the 2017 general election campaign, when a proposed change to how social care is paid for was criticised as unfair to people with long, expensive conditions such as dementia. Alzheimer’s Society has since described the same gap as a ‘dementia penalty’. The complaint is that a person whose condition is treated by the NHS gets care free of charge, while a person with dementia who needs round-the-clock support may be asked to pay.

The unfairness people feel comes from how care is classed, not from the illness itself. The NHS funds diagnosis, medical treatment and hospital care. Help with washing, dressing, meals, supervision and a room in a care home is classed as social care, which councils charge for after a financial assessment. Alzheimer’s Society reports that nearly half of people fully fund their own residential and nursing care.

What is free and what is not?

Our guide Is dementia care free? goes through each service in more detail.

How does the means test work in England?

The council looks at capital (savings, investments and sometimes property) and income. The key figures in England are:

• Above £23,250 capital: the person pays the full cost of their care, known as being a self-funder.
• £14,250 to £23,250: the council helps, but the person contributes from income plus tariff income, which is £1 a week for every £250 (or part of £250) of capital above £14,250.
• Below £14,250: capital is ignored, though the person still contributes from income.

Property is where the biggest differences arise. A person receiving care at home generally does not have to sell their home to pay for it. For a permanent care home place, the home can count as capital, but it is ignored for the first 12 weeks, and for as long as a partner still lives there (and in some other cases, such as a relative aged 60 or over). Read more in the care means test explained, the 12-week property disregard and deferred payment agreements.

Does a dementia diagnosis qualify for NHS continuing healthcare?

No. Continuing healthcare depends on assessed needs, not on a diagnosis. A nurse, doctor or social worker completes an initial checklist; if it indicates possible eligibility, a multidisciplinary team assesses 12 areas of need, including cognition, behaviour, mobility and nutrition, with the decision support tool. The person is usually eligible with at least one priority need, or severe needs in at least two areas. The ICB should normally decide within 28 days.

Some people with advanced dementia and complex needs do meet the criteria, so it is worth asking whenever needs are high or have risen suddenly. If you think it could apply, see continuing healthcare for dementia, the CHC checklist explained and how to appeal a decision. Our NHS continuing healthcare checker gives an indication before you apply.

What happened to the care cost cap?

In 2011 the Dilnot Commission recommended a lifetime cap of £35,000 on the care costs people aged over 65 would be expected to pay, and a rise in the upper capital limit to £100,000. The Care Act 2014 provided the legal framework, but the cap was never brought into force: the original April 2016 start was postponed, and a revised plan in 2021 set an £86,000 cap (personal care only, not daily living costs) with the upper capital limit rising to £100,000. That was delayed to October 2025 in the Autumn Statement 2022.

On 29 July 2024 the Chancellor announced the reforms would be cancelled, citing an inherited £22 billion overspend. In 2025 the government set up an independent commission on adult social care, chaired by Baroness Casey. On 29 July 2026 the Prime Minister brought its report on delivering a National Care Service forward from 2028 to summer 2027, and the commission has opened a public conversation on how care should be paid for. Its early work was to look at making the most of existing resources, and its longer-term recommendations on how care is funded are now expected in its final report in 2027. For the latest position, see our care cap guide. In the meantime, plan on the basis that the current means test applies.

What about Scotland, Wales and Northern Ireland?

Charging rules are devolved. Each nation has its own thresholds and, in Scotland, different arrangements for personal care. We cover these in paying for care in Scotland, paying for care in Wales and paying for care in Northern Ireland. Everything above on capital limits applies to England.

How can families limit the costs?

No approach removes the means test, but these steps can make a real difference:

1. Ask for a needs assessment early. It is free, and the council cannot assess for funding without it.
2. Raise continuing healthcare at hospital discharge or whenever needs increase sharply.
3. Claim Attendance Allowance: £114.60 a week at the higher rate or £76.70 at the lower rate, not means-tested. See our Attendance Allowance guide.
4. Check the council tax discount for people with severe mental impairment: council tax discount for dementia.
5. Do not give assets away to avoid fees. Councils can treat deliberate deprivation as if the money were still held: deprivation of assets.
6. Get regulated advice before selling a home or using equity release. The NHS lists the Society of Later Life Advisers, Age UK, Independent Age and MoneyHelper as sources.
7. Put a lasting power of attorney in place while the person still has capacity: lasting power of attorney.

Frequently asked questions

Is the dementia tax a real tax?

No. It is a nickname, not a charge. It refers to dementia care being classed as means-tested social care rather than free NHS healthcare, so people with dementia can be asked to pay for care that people with other conditions receive free.

Will the family home have to be sold to pay for dementia care?

Not for care at home. For a permanent care home place, the home can be counted after the first 12 weeks unless a partner or certain relatives still live there. A deferred payment agreement can delay a sale until later.

Is there a cap on how much I will pay for dementia care?

No. England’s planned lifetime cap was cancelled on 29 July 2024, so there is no limit on what a self-funder can spend. Fees depend on the home, the level of need and the area.

Can I get NHS funding if my relative has advanced dementia?

Possibly. NHS continuing healthcare is based on the level, complexity and unpredictability of needs, not the diagnosis. Ask the GP, hospital team or council for a CHC checklist if needs are high or have risen suddenly.

Who pays if savings run out?

Contact the council about three months before savings fall to £23,250, because funding runs from the date of contact. It will then carry out a financial assessment.

Where to get help next

Try our funding checker or the what will I pay tool for an estimate, read self-funding care, and browse options through find care. For personal advice, call the Alzheimer’s Society Dementia Support Line on 0333 150 3456 or speak to your council’s adult social care team.

Sources

• NHS: Paying for your own care (self-funding)
• NHS: NHS continuing healthcare
• Age UK: Paying for a care home
• House of Commons Library: Introducing a cap on care costs
• GOV.UK: Independent commission into adult social care, terms of reference
• Alzheimer’s Society: Costs of dementia diagnosis and care in the UK

Reviewed by The Care Panel team on 9 November 2026. This guide is general information about care in England, not legal, medical or financial advice. Rules and rates change; check with your council or an adviser before making decisions.