The 7-Year Rule for Care Home Fees in the UK: Myths, Financial Assessments, and Inheritance Tax in 2025

What Is the 7-Year Rule for Care Home Fees?

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The “7-year rule” is often confused with inheritance tax legislation. In terms of care home fees, there is no time limit for deprivation of assets. Suppose a local authority believes that you deliberately gave away property, savings, or other assets to avoid paying care fees. In that case, they may still include those assets in your financial assessment regardless of whether the gift was made 1 year ago or 10 years ago.

This means councils review each case individually, focusing on intention rather than simply the passage of time.

Financial Assessments and Care Funding Thresholds

A financial assessment determines whether you will need to fund your own care (self-funder) or qualify for local authority support. Assessments take into account your savings, income, and assets.

1. If you receive care at home, the value of your property is usually excluded.
2. If you move into a care facility, your property may be included, depending on the circumstances.

Current UK Savings Thresholds for 2025/26

If your assets exceed the upper threshold, you are classed as a self-funder. Between the upper and lower thresholds, you may receive partial funding. Below the lower threshold, your care is fully funded by the local authority.

The 7-Year Rule and Inheritance Tax

The inheritance tax (IHT) 7-year rule is separate from care funding rules. Inheritance tax allows individuals to gift assets and avoid tax liability if they survive seven years after making the gift.

1. Each person can pass on up to £325,000 tax-free.
2. An additional £175,000 residence nil-rate band may apply if a property is left to direct descendants, raising the threshold to £500,000.
3. Anything above these thresholds is taxed at 40%.

If you pass away within seven years of gifting assets, inheritance tax may still apply, depending on the timing and value of the gift.

Deprivation of Assets: Key Considerations

Local authorities use the concept of deprivation of assets to determine whether assets were deliberately transferred to avoid paying care fees. They may consider:

- Timing of the gift in relation to care needs
- The individual’s health and financial planning history
- Whether the transfer was part of legitimate estate planning or specifically to reduce care costs

For authoritative guidance, consult: UK Government – Paying for Your Own Care

FAQ – The 7-Year Rule for Care Home Fees

What is the 7-year rule for care home fees?

It’s a misconception. Unlike inheritance tax, there is no 7-year rule for care home fees. Councils can review asset transfers at any time.

Can I gift my house to my children to avoid care fees?

You can gift property, but if the local authority views it as deliberate deprivation of assets, they may still treat it as though you own it during the financial assessment.

What assets are exempt from care home fees?

If you receive care at home, your property is usually exempt. Certain types of income and personal belongings may also be excluded.

Does the 7-year inheritance tax rule apply to care home fees?

No. The inheritance tax rule and care home funding rules are separate systems with different criteria.

How are financial thresholds applied in 2025?

Thresholds vary by country within the UK. For example, in England, assets above £23,250 mean you fund your own care, while in Wales the threshold is £50,000.

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