Two figures decide how the means test treats your savings: £14,250 and £23,250. Below the lower one, your capital is ignored. Above the upper one, you are expected to pay the full cost of your care. But land in the gap between them — as a great many self-funders with a modest nest egg do — and a separate, less-publicised rule kicks in: tariff income. It is one of the least-explained mechanics in the whole care-funding system, and it quietly adds pounds to a weekly bill that families rarely see coming until the invoice arrives.
The two capital limits that decide who pays
When a local authority in England carries out a financial assessment for care home fees, it splits capital into three bands. Below £14,250 (the lower capital limit), savings are disregarded entirely and only income is assessed. Above £23,250 (the upper capital limit), the council treats the person as a full self-funder, with no local authority contribution towards the fee. These two thresholds have stayed fixed since 2010 — they have not been uprated for inflation in over a decade, which is exactly why more households now fall inside the gap between them than the system’s original designers likely intended.
How tariff income actually works
For anyone whose capital sits between £14,250 and £23,250, the council does not simply average things out. Instead, it applies a notional weekly income — the tariff income — calculated at £1 per week for every £250 of capital (or part of £250) above the lower limit. That figure is then added on top of actual income such as a pension, before the person’s contribution towards the weekly fee is worked out.
The mechanics are simple once you see the numbers laid out. Consider three self-funders with different savings balances:
| Capital held | Amount above £14,250 | Assumed tariff income (per week) |
|---|---|---|
| £16,000 | £1,750 | £7 |
| £20,000 | £5,750 | £23 |
| £23,000 | £8,750 | £35 |
Because any part of a £250 band counts as a full £250 for this purpose, the assumed income rounds upward, not downward. A person with £20,001 in savings is treated the same as someone with £20,250 — the extra pound still buys a full extra £1 a week added to their assessed income. It is a blunt instrument, and it is applied the same way regardless of what interest, if any, those savings are actually earning.
What counts as capital — and what doesn’t
Tariff income only bites on capital the council is actually allowed to count, so it is worth knowing what falls inside that definition. Assessable capital generally includes savings accounts, investments such as ISAs, shares and premium bonds, and property or land beyond the primary home in the right circumstances. Where an asset is held jointly — a joint savings account, for instance — only half its value is normally counted as belonging to the person being assessed.
The family home is the notable exception that trips people up. It is usually excluded from the capital assessment where a spouse, partner, a relative aged 60 or over, or a dependent child still lives there, and even where none of those apply it is disregarded for the first 12 weeks of a permanent stay. But that is a separate protection with its own rules — it doesn’t change how tariff income is calculated on whatever cash and investments a person holds outside the property itself.
Income on top: pensions, benefits and the personal allowance
Tariff income is added to, not instead of, a person’s real income. Pensions, most benefits, annuity payments and any earnings are all assessed alongside the notional sum generated by savings in the tariff band. From that combined total, the council must let the person keep a Personal Expenses Allowance — a small weekly sum that is theirs to spend regardless of what the assessment concludes — before working out the contribution owed towards the fee. Because the means test is applied to the individual, not the couple, a person’s own savings are what gets tariffed even where a spouse or partner holds separate or joint assets; the rules for how those are split are a common source of confusion and worth checking carefully with the assessing authority rather than assuming.
Why this catches self-funders off guard
The households most exposed to tariff income are rarely the ones expecting a shock. Someone who has just moved from being fully self-funded — paying the whole fee from savings above £23,250 — and watches that pot fall below the upper limit will find their weekly bill doesn’t drop as cleanly as they might hope; part of what remains is still being treated as generating income, even while the capital itself is steadily being drawn down to pay the fee. Because the two limits have not moved since 2010, a household with what once looked like a comfortable buffer can now find itself firmly inside the tariff band without ever having planned for it.
None of this is a substitute for a proper, individual financial assessment, and nobody should restructure savings or give away assets purely to change how they are assessed — deliberate deprivation of assets is treated separately by councils and can be investigated. What every household weighing up care costs deserves is a plain-English understanding of how the sums actually work, checked against their own circumstances with a qualified financial or legal adviser experienced in care funding, rather than a headline figure that turns out to hide a second calculation underneath it.