Are you paying a tax on your care fees?

Tax on care fees

Those funding the cost of their own care are paying £200+ more per week than the Local Authority would pay for the same room. The extra fees are being used to pay for residents who are unable to pay for themselves and are dependent on Local Authority funding.

A report by charity Age UK also reveals that care homes are also putting up fees arbitrarily midway through the year, citing reasons such as the ‘resident’s needs changing’ or the ‘resident requiring some other form of care’. Residents are also being charged for extras such as entertainment which they may or may not actually want. The charity is calling for more protection for those self funding care, and more openness about who is paying what for rooms.

Around 400,000 elderly people in the UK live in care homes with around half paying for care out of their own funds – either by selling their family home or running down their savings.

The figures reveal that those paying for their own care have average weekly bills of between £603 and £867 – depending on the area. In the South East, care fees can be as high as £1,000 per week. However, these figures are at least £200 over what a Local Authority will pay for the same rooms where the Local Authority are funding those who have no savings. The £200+ uplift paid by those who fund their own care amounts to more than £10,000 a year. Four years ago, this ‘tax’ was just £40 a week. The extra charge has grown because budget cuts have resulted in Local Authorities reducing the amount they are willing to pay for beds. As Local Authorities are the biggest buyer in the residential care market, they can often negotiate very low rates – but in many cases they are now paying below cost price, with those funding their own care picking up the bill.

Age UK referred to the £200+ weekly payment as a “backdoor tax”. Editor of the Good Care Home Guide Stephen Burke called it “a stealth tax on the middle classes that hides the full extent of the care crisis in this country”.

Campaigners believe it is unfair that those who have saved hard for their whole lives now not only have to lose their savings and assets to care fees, but also have to pay for others too.

With the cost of care being artificially inflated to subsidise Council funded places, self funders are finding that their assets deplete more quickly than before, reducing the amount of inheritance they can leave to their children or grandchildren.

Most residential care services are provided by commercial companies who have struggled financially in recent years. The introduction of the national living wage has sent their costs rocketing by as much as 30%. The Care Home Regulator is concerned that thousands of providers are at risk of going bust, or leaving the industry.

Stephen Burke suggests those unhappy with how a care home is run should complain to the Quality Care Commission.

Read more: Behind the headlines: ‘stuck in the middle’ – self funders in care homes, Age UK

Who funds the cost of care?

If you need care and you have assets (including your home) over £23,250, you will usually be asked to pay for the care yourself. Once your assets deplete below the £23,250 limit, the Local Authority will fund part of your care, expecting you to make a contribution. Once your assets reach £14,250, the Local Authority will pay for your care in full.

However, most people are unaware that funding is available through the NHS Continuing Healthcare scheme. When a person needs care, the Local Authority will often perform a means test first to see if that person has assets to pay for care themselves. Instead, they should be performing an assessment under the NHS Continuing Healthcare scheme to see if funding is available.

The criteria for NHS Continuing Healthcare funding is strict and not everyone will qualify. However, it is believed that far more people could claim for the funding than actually do.

If eligible, the person will not have to pay for their care – regardless of their income or assets. Click here to find out more about the NHS Continuing Healthcare Scheme.

Halving the problem

Couples can protect their half of the assets if they act now. If you own your home as Tenants in Common and leave your share of the assets to your partner in trust, your partner will be able to live in the home (or their choice of another property) and use any assets during their lifetime after your death. If they need care and they are not eligible for funding, the Local Authority will not be able to take your share of the assets into account when performing a means test. This means your assets are safe and can be passed down to your children or grandchildren.

Some people try to avoid the risk of care fees by putting their assets into a trust during their lifetime – or by gifting the property to a family member such as a son or daughter. Typically this will be regarded by the Local Authority as deliberate deprivation. Consequently, they will take the value of the property into account when performing a means test – even if the person needing care no longer owns it. Speak to us for further advice on this point.

Take action:

  • If you are unhappy any aspect of the way a residential care home is run (including charging) and you are unable to resolve the problem direct, you can make a complaint to the Quality Care Commission – click here to find out how.
  • If you or a friend/relative needs care, make sure that you (or the friend or relative concerned) has had an assessment for NHS Continuing Healthcare funding.
  • If you have an elderly friend or relative, make sure they have both types of Lasting Power of Attorney in place. This allows you to help them, and  to make decisions for them, if they lose mental capacity in the future. If they need a NHS Continuing Healthcare assessment, a Lasting Power of Attorney (for Health and Care decisions) will also allow you to be involved in the process and appeal if you do not agree with the decisions made.
  • If you are a couple, make sure you own your home as tenants in common and use your Will to create a trust. If your partner needs care after your death, your share of the assets will not be included in a means assessment, should they be ineligible for funding.

What now?

We have prepared a free, helpful guide which covers topics such as owning your home as Tenants in Common, protecting your share of the assets using your Will, and making a Lasting Power of Attorney. Click the info pack link above to order yours.

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