What is capital and how will the local authority assess this?

Capital can include buildings, land, premium bonds, shares and savings that you own. You may own a property with someone else and unless this is land, the local authority will take into account the benefit you are legally entitled to receive from that property rather than the value of the property or the ownership of it in itself.

This means that the authority will take into account any profit you may receive if the property is sold – they have rules for assessing the value of such property depending on each individual’s circumstances.

The rules on what does and doesn’t count as capital can be complicated; some capital can always be left out (or left out for periods of time) depending on the circumstances.

Your main home will not count as capital if you need to stay in a residential care home for a temporary period but if you need to move to residential care permanently, it’s important to know that the value of your former home will be considered as capital and taken into consideration for part of the financial assessment.

However, it will not count as capital if any of the following people are living there permanently before your move into a care home:

• Your partner,
• Your ex-partner (as long as you were a couple when you moved into the care home),
• Your ex-partner if they are a lone parent,
• A family member aged 60 or over,
• Your child who is aged under 18, or
• A family member who is incapacitated.

If your capital does not count, this is known as being ‘disregarded’.

How does my capital affect how much I have to pay?

If the local authority works out you have capital worth more than £26,500 you will have to pay for all of your residential care accommodation. If they run the service where you will be living, they will set a standard fee but if they don’t run the service, they will charge you what the service charges them.

If your capital is between £16,250 and £26,500, the local authority will include it when deciding how much you will have to pay. For every £250 over £16,250 you own, they will assess you as being able to pay £1 a week towards the cost of your eligible care needs. This is called ‘tariff income’.

If you have capital below £16,250 then it will not count and depending on your financial assessment, you may not have to make any payment towards your care home costs.

What does ‘notional capital’ mean?

Notional capital is capital that may be included in the means test even though you do not have it, such as capital that:

• You could have if you applied for, such as a pension,
• Is paid to someone else instead of you, or
• You have got rid of yourself, to reduce how much you have to pay (‘deprivation of capital’).

Examples of deprivation of capital can include:

• Giving money away as a gift,
• Going on expensive holidays, or
• Depriving yourself of income in order to reduce the charge payable.

What is income and how will the local authority assess this?

Your income can include most regular payments, including most benefits and personal pensions. Income can be taken fully into account, partly disregarded or fully disregarded. Some of the benefits that are fully disregarded (not included as income) are:

• Mobility component of disability living allowance,
• Mobility component of personal independence payment,
• Direct payment for social care not linked to residential care,
• Child benefit, and
• Child tax credit (or Child Element of Universal Credit).

These are just some of the common benefits that are not included – this is not a complete list.

If the local authority treats your disability-related benefits as income, they should also consider if you have extra costs because of your disability. For example, they may leave you with extra money to pay for a carer that you have arranged for yourself.

Any income you get from being employed or self-employed is counted but assessments that will be disregarded are:

• Tax and National Insurance,
• Expenses paid entirely for work-related costs,
• Occupational pension, and
• Payment in kind.

Self-employed income will also be assessed, minus:

• Tax and National Insurance,
• Half of any sum paid to a pension plan,
• Stock costs,
• Transport costs related wholly to the business, or
• Stationery.

The same rules apply when assessing notional income as they do for assessing notional capital. For example, if you have a pension that you could be receiving but have chosen not to claim it, the local authority can treat you as if you are receiving it.