Local Authority Funding for Care: How Council Funding Works

When someone has eligible care needs and passes the council’s financial assessment, the local authority must meet those needs and set a personal budget, which is the amount it will spend on their care. The council decides what it will pay, but the person has a legal right to a genuine choice of care home or other accommodation, and a top-up is only allowed when someone actively chooses a dearer option.

At a glance

• The personal budget is the cost to the council of meeting your assessed needs, taken as a direct payment or arranged by the council.
• A care home top-up must be optional and never the result of too few affordable places.
• For home care the council must leave you a minimum income; in 2026/27 this is £241.45 a week for a single person of Pension Credit age.
• Complain to the council first; the Local Government and Social Care Ombudsman can investigate once you have been through the council’s own complaints process.
• Scotland, Wales and Northern Ireland have different systems.

What does the council have to fund?

Under the Care Act 2014, a council must assess anyone who appears to need care, whatever their finances. Care is only funded where needs are eligible, meaning they arise from a physical or mental impairment or illness, you cannot achieve two or more specified outcomes, and there is a significant impact on your wellbeing. Funding then depends on the means test, which is explained in our guide to paying for care in England.

The 2026/27 capital limits are £23,250 and £14,250, with £1 a week counted for every £250 between them. This guide covers what happens after that: how the council sets the price, how top-ups work and what to do if you disagree.

How do personal budgets and direct payments work?

If the council meets your needs it must give you a personal budget as part of your care and support plan. The NHS lists three ways to take it, or a combination:

• A direct payment into your bank account, usually with receipts to show it was spent on care.
• The council arranges care and pays providers.
• An organisation you choose, such as one using an individual service fund, manages the budget.

Direct payments cannot currently pay for a long-term care home placement. They can fund a short stay, such as respite, if it does not exceed four consecutive weeks in any 12-month period. Our direct payments and personal budgets guide covers how to use them.

How does the council decide the price it will pay?

The statutory guidance defines the personal budget as the cost to the council of meeting your needs. Councils should explain how they calculated it, and the guidance names three principles: transparency, timeliness and sufficiency. It also says councils should not set arbitrary ceilings on budgets that push people into care homes against their will. If the amount looks too low to meet your assessed needs, you can challenge it.

In practice, councils set or negotiate the rates they pay providers, and these can differ from the fees paid by people funding their own care. The Competition and Markets Authority found in 2017 that, in care homes, self-funders paid on average £846 a week in 2016 against £621 from councils, and that councils do not have to justify their approach to the fees they pay to care homes. That study is several years old, so treat it as background rather than current prices. See council care rates for typical figures, and why care homes are so expensive for context.

Councils also have market duties. They must have regard to ensuring enough provision for people in their area, whoever funds it, and should check that fee levels are appropriate to deliver the agreed care at a good standard.

Can a care home ask for a top-up fee?

Sometimes, but the rules protect council-funded residents. The council must make sure at least one suitable care home is affordable within your personal budget, and ideally more than one. If you have not expressed a preference and it cannot offer an affordable suitable place, it must arrange a dearer place, adjust the budget and must not ask for a top-up. A top-up is only lawful where you chose a more expensive home than the one the council would otherwise have paid for.

Read our guide to care home top-up fees for what to ask, and the Scottish, Welsh and Northern Irish versions if you live there. The CMA found in 2017 that about a quarter of council-funded residents pay top-ups.

Can you choose any care home?

You can express a preference. The home must be suitable for your needs and available, and the provider must be willing to accept the council’s rate and terms. The council cannot limit your choice to providers it already contracts with or to homes inside its boundary. If you choose a home outside the area, the council still arranges it and considers the cost of care there when setting your budget. Our guide to choosing a care home when the council pays shows how to do this in practice.

What can the council charge for home care?

For care in your own home, extra care housing or supported living, the council can charge based on a financial assessment. Your home is not counted, but income and capital over the limits are. The council must leave you with at least the minimum income guarantee (MIG), and may let you keep more.

A person with capital above the upper limit can be charged the full cost of care at home, and the council may add an arrangement fee covering only its actual costs. See the home care means test.

What if you are council-funded and your circumstances change?

The council will normally reassess your finances once a year. If you pay for yourself, contact the council about three months before you expect your savings to fall below £23,250, because funding runs from the date you contact them and is not backdated. Our guide to what happens when money runs out in a care home explains the process.

How do you appeal or complain?

1. Ask for a review. If your budget or plan does not meet your needs, ask the council in writing to review it and explain how it calculated the amount.
2. Use the council’s complaints procedure. Anyone dissatisfied with a decision can complain, including about the financial assessment or how it has chosen to charge. The council must tell you how.
3. Go to the Ombudsman. The Local Government and Social Care Ombudsman investigates adult social care complaints, including about privately funded care, once you have been through the council’s own complaints process. Ask about time limits.
4. Get an advocate. If you struggle to make your case, see what is advocacy in social care.

Our challenge letter template can help you write to the council.

How does this differ in Scotland, Wales and Northern Ireland?

• Scotland: Councils fund personal care for free after an assessment, regardless of age, income or savings. See paying for care in Scotland.
• Wales: Charges for non-residential care are capped at £100 a week. See paying for care in Wales.
• Northern Ireland: Health and Social Care Trusts, not councils, arrange care. See paying for care in Northern Ireland.

Frequently asked questions

Who decides how much the council pays for care?

The council sets your personal budget when it makes your care and support plan. It should be transparent, timely and sufficient to meet your assessed needs, and you can challenge it if you think it is too low.

Can the council make me pay a top-up?

No. A top-up must be optional. The council must offer at least one suitable home affordable within your budget, and cannot ask for a top-up if no suitable place exists at that price. It applies only if you choose a dearer home.

Can I use a direct payment to pay for a care home?

Not for a long-term placement. Direct payments can fund a short care home stay, such as respite, if it does not exceed four consecutive weeks in any 12-month period. They are used mainly for care at home.

How much can the council charge for home care?

It can charge up to what you can afford after a financial assessment, leaving you at least the minimum income guarantee. In 2026/27 that is £241.45 a week for a single person of Pension Credit age. If your capital exceeds £23,250, the council can charge the full cost.

Who can I complain to if the council refuses funding?

Complain to the council first using its complaints procedure. If you are still unhappy, the Local Government and Social Care Ombudsman can investigate for free. It investigates complaints about councils and adult social care providers once their own complaints process has ended.

Where to get help next

Check likely funding with the funding checker and see what you might pay with the what will I pay tool. Our guide to care home fees explains charges, and find care lets you search local providers.

Sources

• GOV.UK: Care and support statutory guidance
• GOV.UK: Social care charging 2026 to 2027, local authority circular
• NHS: When the council might pay for your social care
• Competition and Markets Authority: Care homes market study, summary of final report
• Local Government and Social Care Ombudsman: Adult social care
• mygov.scot: Costs of personal and nursing care

New guides: Average Care Home Fees in England: What Drives the Cost

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.