As the cost of long-term care rises in the UK, many families are asking whether care home fees can be deducted for tax purposes. The financial burden of residential care can be significant, especially for those who are self-funding. In 2025, while direct tax deductions remain unavailable, several financial reliefs, government benefits, and local authority support mechanisms can reduce the real cost of care.
This guide explains the updated rules, outlines what reliefs exist, and highlights what families should watch for when planning for care home expenses.
Are Care Home Fees Tax Deductible in the UK?
The short answer: No. HMRC does not allow individuals to deduct care home fees directly from taxable income. Unlike some countries where long-term care expenses may be offset against tax bills, the UK system relies on means-tested benefits, NHS funding schemes, and specific allowances to help manage the costs.
That said, it is possible to reduce the financial burden by accessing Continuing Healthcare funding, local authority contributions, and non-means-tested benefits such as Attendance Allowance. Families should also pay close attention to care home contracts, as hidden clauses or unclear fee structures can complicate financial planning.
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Updated Rules and Reliefs for 2025
NHS Continuing Healthcare (CHC): If an individual has a “primary health need,” the NHS may cover all care home costs. This is not a tax deduction, but it can result in fully funded care.
Local Authority Funding: Councils assess income and savings. In 2025, the upper capital limit remains around £23,250 (England). Below this threshold, residents may qualify for partial support.
Attendance Allowance & Disability Benefits: These non-means-tested payments help with personal care needs. They do not go directly to the care home but support the resident’s overall costs.
Deferred Payment Agreements: Councils may allow families to delay payment of fees, often secured against property, reducing immediate cash flow strain.
Personal Expenses Allowance (PEA): Residents supported by councils retain a small weekly amount of income for personal spending (clothing, toiletries).
Care Home Costs and 2025 Relief Options
| Relief / Support Option | What It Covers | Key Conditions in 2025 |
|---|---|---|
| NHS Continuing Healthcare (CHC) | Full funding for care where health needs are primary | Strict eligibility assessment; does not apply to everyone |
| Local Authority Means-Tested Funding | Contribution towards accommodation and care fees | Support available if assets below £23,250 (England threshold) |
| Attendance Allowance / Disability Benefits | Helps with personal care costs | Non-means-tested; available to those with care needs |
| Deferred Payment Agreement | Allows fees to be postponed and repaid later | Secured against property; interest may apply |
| Personal Expenses Allowance (PEA) | Weekly income retained for personal use | Applies when local authority funds part of the care |
Why This Matters for Care Homes
Families often focus on quality of care, but the financial structure of care homes is equally important. Whether residents are self-funding or receiving local authority support, the contract terms determine how fees are calculated, how increases are applied, and which services are included.
Because costs are not tax deductible, scrutinising contracts is vital:
- Confirm which services are included vs. optional extras.
- Ask how fee increases are communicated.
- Understand how care plan changes affect charges.
These details directly affect how affordable care home living will be in the long term.
For authoritative information on paying for care, see the NHS – Paying for your own care (Self-funding) guide.
FAQ – Care Home Costs and Tax Rules
Are care home fees tax-deductible in the UK?
No. HMRC does not allow deductions of general care home fees from taxable income.
What funding is available instead of tax deductions?
Options include NHS Continuing Healthcare, local authority means-tested funding, and Attendance Allowance.
Do disability benefits continue if someone enters a care home?
In some cases, yes. Attendance Allowance may stop if the local authority funds the placement, but it remains if care is fully self-funded.
Can property value be used to pay fees without selling immediately?
Yes. Deferred Payment Agreements allow fees to be postponed and repaid later, often from property sale proceeds.
Does the care home contract affect access to funding?
Yes. Contracts must specify what counts as care vs. accommodation. This distinction impacts how fees are assessed and what support may apply.
In 2025, care home fees will remain non-deductible for tax purposes in the UK. Families should instead focus on maximising available reliefs and benefits, and carefully review contracts to understand financial commitments. The distinction between medical needs, personal care, and accommodation remains central to what support is available.
Need help finding a care home?
Senior Home Plus offers free personalized guidance to help you find a care facility that suits your health needs, budget, and preferred location in the UK.
Call us at 0203 608 0055 to get expert assistance today.
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