Direct Payments & Personal Budgets: Paying for Care Your Way

Direct payments are council money paid to you, instead of the council arranging care for you, so you don’t have to accept whoever it has commissioned. Every council in England offers direct payments under the same national rules in the Care Act 2014. You can use them to pay a CQC-registered home care agency or to employ your own personal assistant (PA) — and for most families, that’s the difference between a rota of strangers and a small, consistent team.

At a glance

• A direct payment is your personal budget paid as money, usually into a dedicated bank account or pre-paid card.
• You must have eligible needs under the Care Act 2014 and be able to manage the payment, alone or with help.
• You can pay a CQC-registered agency or employ a PA. If you employ someone, you become their employer.
• You can’t normally pay a close relative who lives with you, unless the council agrees it’s necessary.
• Any contribution from the means test is still deducted, and the council monitors spending.

Personal budget vs direct payment

Two terms, often confused:

• Personal budget — the amount your council calculates it will cost to meet your assessed eligible needs, worked out after a needs assessment. Everyone with council-funded care has one.
• Direct payment — one way of receiving that budget: as money paid to you, rather than the council arranging care itself.

You can take the budget in three ways (Age UK Factsheet 46, May 2026):

You can also mix them: part managed, part direct payment.

How do direct payments work?

The council pays the money into a dedicated account or onto a pre-paid card, kept apart from your own money. You use it to buy the support in your care and support plan, and the council checks spending through statements or an online card account.

What’s the legal basis?

Direct payments are set out in sections 31 to 33 of the Care Act 2014 and the Care and Support (Direct Payments) Regulations 2014. The rules are national, but each council has its own policy and support service, for example payroll help and PA registers.

Why families choose direct payments

• Choice of provider. Council-commissioned care goes to whoever holds the contract and has capacity. A direct payment lets you pick on quality, CQC rating and continuity.
• Continuity of carers. The most common reason: you can keep the same carer.
• Timing that suits you. Council packages often come with fixed visit windows; buying directly gives you more say over when.
• Flexibility. The budget must meet the assessed outcomes, but that can sometimes be done creatively rather than with standard visits.
• You can top it up. Add your own money to buy more hours or a preferred provider.

Who can get direct payments?

You can usually have a direct payment if:

• the council has assessed you as having eligible care needs;
• you ask for one; and
• you’re able to manage it, or someone can manage it for you.

If you lack mental capacity to manage the money, an authorised person, such as a family member or attorney, can receive and manage it for you. If you have capacity but would like help, you can name a nominated person.

If the council refuses a direct payment, you can challenge the decision (Age UK Factsheet 46).

What can direct payments be used for?

Direct payments must be spent on meeting the eligible needs in your care and support plan. Within that, you have a lot of choice. Age UK puts it this way: “You can choose to use the money in the way that best suits you, with regard to meeting the eligible needs identified in your care and support plan.”

Generally yes: a CQC-registered home care agency you choose yourself, a personal assistant (PA) you employ directly, respite and short breaks, equipment that meets an assessed need, and activities or transport that achieve an agreed outcome (getting to a day service, maintaining a social life).

Generally no: anything unrelated to the assessed needs, long-term residential care fees, gambling or debt repayment, and — usually — paying a family member who lives in the same household (see below).

Agency or personal assistant?

A common problem is that the council’s budget is usually based on what the council pays providers. The Homecare Association puts the minimum sustainable price for council-funded home care in 2026/27 at £34.42 an hour, and many councils pay less; in Greater London, for example, the average council rate was about £21.87 an hour in 2025/26 (Homecare Association, 2026). Many private agencies charge more, so ask the council how your budget was calculated. If it isn’t enough, ask for a review, or top it up yourself.

For more on choosing between models, see care agency vs self-employed carer.

Can I use direct payments to pay a family member?

Sometimes. The rules (Care and Support (Direct Payments) Regulations 2014, reg 3) say you can’t normally use direct payments to pay:

• your spouse, civil partner or partner you live with; or
• a close relative, or their spouse or partner, who lives in the same household,

unless the council decides it’s necessary to meet your needs or to manage the direct payment. Councils treat this as exceptional; preferring a family member isn’t usually enough. Ask before assuming either way.

Relatives who live elsewhere can generally be employed as PAs. If you employ a relative, the normal employer rules apply.

A family carer may also be entitled to a carer’s assessment and to Carer’s Allowance of £86.45 a week in 2026/27, if they care for 35 hours or more and earn no more than £204 a week (DWP). Following a carer’s assessment, some councils make a carer’s direct payment — sometimes a one-off amount for something that sustains you in the caring role. See carer burnout.

What are my duties if I employ a PA?

If you use a direct payment to employ a PA, you are their employer. That usually means:

• Tax and payroll: registering with HMRC and running PAYE if pay is at or above the Lower Earnings Limit, with payslips and National Insurance. Many councils offer or recommend a payroll service.
• Minimum pay: at least the National Living Wage, £12.71 an hour from April 2026 for workers aged 21 and over. In London, the voluntary London Living Wage is £14.80 an hour (Living Wage Foundation).
• Employment rights: holiday pay, Statutory Sick Pay, a written statement of terms and auto-enrolment pensions.
• Insurance: councils require employers’ liability insurance for direct-payment employers; specialist PA insurance usually includes public liability too.
• DBS checks: you can’t apply for a DBS check yourself, but an enhanced check with the adults’ barred list is available through a registered umbrella body or your council’s scheme.
• Cover: arranging someone else when your PA is off sick or on holiday.

Care from a PA you employ directly is not CQC-inspected, so references and checks are especially important.

That list is why buying from a CQC-registered agency avoids most of the admin: the agency is the employer, and you simply pay invoices. Most families who find employing a PA overwhelming didn’t realise what they were taking on.

Do I still have to pay towards my care?

Yes, if the means test says so. A direct payment doesn’t change the financial assessment. The council usually pays the direct payment net of your assessed contribution, and you pay your contribution into the account. In 2026/27, people with capital over £23,250 usually pay the full cost; your home isn’t counted for care at home. See the home care means test.

Some people’s care is funded by the NHS through Continuing Healthcare. In that case, the equivalent is a personal health budget, which you have a legal right to request, and which can also be taken as a direct payment. See NHS Continuing Healthcare at home.

How do I apply for direct payments?

1. Request a care needs assessment from your council’s adult social care team; it’s free, regardless of savings. In London, see our guide to London borough adult social care.
2. Say early that you’d like a direct payment. It helps shape the support plan. The council must offer one where you’re eligible and able to manage it, with or without support.
3. Have the financial assessment, which sets your contribution.
4. Agree the care and support plan and personal budget. Check the hourly rate it’s based on against real quotes from local agencies.
5. Set up the account or card the council requires, and sign the direct payment agreement.
6. Choose your support: get quotes from registered agencies, or recruit a PA through the council’s PA register.
7. Keep records of all spending and keep receipts.
8. Review regularly. If needs change, ask for a reassessment.

Timescales vary between councils. If care is needed urgently, the council can arrange services first and switch to a direct payment once the account is set up, so ask about interim support.

Can a family member manage a direct payment for a parent with dementia?

Yes. If your parent lacks the mental capacity to agree to or manage a direct payment, the council can pay it to an authorised person who manages it in their best interests. This is often a son, daughter or other close family member, and may be the person who holds a Lasting Power of Attorney for property and financial affairs.

As an authorised person you would:

• keep the account separate from your own money;
• use it only for the support in your parent’s care plan;
• keep receipts, timesheets and invoices for council monitoring;
• act as the employer if you hire a PA on your parent’s behalf.

Many councils and local support organisations offer direct payment support services — payroll, managed accounts, recruitment help — sometimes for a fee paid from the budget. Ask what’s available before you decide; it changes the calculation considerably.

For all the ways to fund care, see our pillar guide to paying for home care.

Frequently asked questions

What is a direct payment for care?

Money paid to you by the council instead of it arranging care itself, so you can choose your own provider or employ a carer directly. Every council in England offers them to people with eligible needs. It’s one way of receiving your personal budget — the amount the council calculates is needed to meet your assessed needs.

Do I need to be an employer to use direct payments?

No. You can use a direct payment to buy care from a CQC-registered agency, in which case the agency is the employer and you simply pay invoices. You only become an employer if you choose to hire a personal assistant directly — then you take on contracts, payroll, tax, pension, holiday pay, insurance and cover.

Can I pay my daughter with direct payments?

If your daughter lives elsewhere, generally yes, as a personal assistant with normal employer duties. If she lives in the same household, you can’t normally pay her unless the council decides it’s necessary to meet your needs or to manage the payment. Ask your council about its policy.

Is a direct payment enough to pay a care agency?

Not always. Council budgets are often based on the rates councils pay providers, which are often below the Homecare Association’s minimum sustainable price of £34.42 an hour for 2026/27. Many private agencies charge £26–£38 an hour as of 2026. If your budget can’t buy the care you need, ask for a review.

Can I top up a direct payment with my own money?

Yes. Many families add their own funds to buy more hours than the budget covers or to use a preferred provider. Keep the accounting clear between the two.

What happens if I don’t spend all my direct payment?

Councils monitor direct payment accounts. If money builds up beyond what’s needed, the council can usually reclaim the unspent amount or reduce future payments. If you keep underspending, it may mean the budget or support plan needs reviewing. Speak to the council rather than letting large balances build up.

What if managing a direct payment becomes too much?

You can switch back to a council-managed budget, or to an Individual Service Fund where a provider holds and manages the money for you. Ask the council about direct payment support services first — payroll and managed account help is often available.

Sources

• Age UK Factsheet 46: Paying for care and support at home, May 2026
• GOV.UK: apply for direct payments
• Care and Support (Direct Payments) Regulations 2014 (legislation.gov.uk)
• Homecare Association response to the Low Pay Commission, 2026
• GOV.UK: National Minimum Wage and National Living Wage rates
• Living Wage Foundation: London Living Wage
• GOV.UK: employing staff
• GOV.UK: DBS check requests guidance for employers
• CQC: introductory agencies and individual care workers
• NHS: personal health budgets
• DWP benefit and pension rates 2026 to 2027 (GOV.UK)

The Care Panel is an independent publication. We are not a care provider and are not regulated by the Care Quality Commission, because we do not deliver care. Always check a provider’s own CQC registration and inspection report before you commit.

Written and fact-checked by The Care Panel. Last updated September 2026. Based on the Care Act 2014 and statutory guidance. General information, not financial, legal or medical advice.

Reviewed by The Care Panel team on 15 October 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.