Care Home Top-Up Fees Explained

If a local authority is funding a place in a care home, but the home you've chosen costs more than the council's set rate, someone must cover the difference. That difference is called a top-up fee, also known as a third-party contribution.

What Are Care Home Top-Up Fees?

A care home top-up fee is the difference between what a local authority agrees to pay for a care placement and the actual weekly cost of the chosen care home. They are paid by a third party, usually a family member and are separate from the resident's personal care contribution.

Under the Care Act 2014, every local authority must set a "personal budget" that covers the full cost of suitable care. If a resident or their family chooses a home that charges above that budget, for reasons of preference rather than assessed need, a top-up fee may be required to bridge the gap.

It is important to understand the distinction: top-up fees apply to choice, not to need. If a particular care home is the only one that can meet your loved one's care needs, the local authority cannot ask you to pay a top-up. The responsibility to fund appropriate care lies with the council.

Why Do Top-Up Fees Exist?

Local authorities fund care placements up to a maximum weekly rate, their "usual cost", which reflects what they consider sufficient to meet a person's assessed needs in their area. Many care homes, particularly those with superior facilities, specialist dementia units, or rural settings, charge rates above this threshold.

When a family selects one of these homes as a matter of preference, the care home effectively requires confirmation that the full fee will be met. Rather than refusing the placement, most councils will allow the arrangement to proceed provided a third party agrees in writing to cover the shortfall. That written commitment is the top-up agreement.

Who Can Pay Care Home Top-Up Fees?

Top-up fees can be paid by:

A family member (the most common arrangement)
A friend or neighbour
A charitable organisation or trust
The resident themselves, but only in limited circumstances (see below)

Can the Resident Pay Their Own Top-Up Fee?

Under standard funding rules, residents who are local authority-funded cannot pay their own top-up from their personal savings or income. This is to prevent councils from using the top-up mechanism to extract funds they should be covering directly.

There is one formal exception: residents with a Deferred Payment Agreement (DPA). Under a DPA, the local authority places a legal charge on the resident's property and effectively lends them the money to cover care fees, including top-up fees, until the home is sold. In this context, the resident can technically fund the top-up through the deferred payment arrangement.

"Families often come to us not knowing any of this. Once we explain what a top-up fee actually is and what it isn't, the financial picture becomes much clearer, and people feel more in control of the decision."

When Are Top-Up Fees Required?

Top-up fees typically arise in three situations:

Preferred care home above the council rate. The family chooses a home that charges more per week than the local authority's usual cost ceiling. The council will fund up to its rate; the family covers the rest.
Preferred room within an approved home. A local authority may agree to fund a standard room in a care home, but if a resident wants a larger, en-suite, or ground-floor room at a premium, the difference is met via a top-up.
Additional services not covered by the personal budget. Certain premium services such as a higher-specification activities programme, private therapy sessions, specialist dietary catering may sit outside the funded care package and attract top-up-style additional charges.

What Does the Law Say About Top-Up Fees?

The Care Act 2014 and the associated statutory guidance set out the legal framework governing top-up fees in England. Key provisions include:

The local authority must identify at least one care home within its usual cost ceiling that can meet the resident's assessed needs. If it cannot, it must increase the personal budget.
Top-up fees cannot be required by the local authority as a condition of placing someone in care.
The third party paying the top-up must enter a written agreement with the local authority, not the care home, setting out the amount, frequency, and review process.
The arrangement must be voluntary. No family member can be coerced into paying a top-up. If no one is willing or able to pay, the council must find a suitable placement within its standard rate.
Top-up agreements in Wales are governed by the Social Services and Well-being (Wales) Act 2014, which carries similar protections but operates through different local authority frameworks.

If you are uncertain whether a top-up fee is legally required in your circumstances, the charity Age UK offers free, independent guidance.

How Much Are Care Home Top-Up Fees?

There is no fixed figure. The gap between local authority rates and care home fees varies considerably by region, by home, and by the type of care required.

As a general guide:

Local authority weekly funding rates for residential care in England typically range from around £600 to over £900 per week, depending on the area and level of need.
Average weekly care home fees in England were approximately £1,000–£1,200 for residential care and higher for nursing care, according to data from LaingBuisson's 2023/24 care home market survey.
Top-up fees of £100–£300 per week are common. In London and the South East, the gap can be considerably larger.

These amounts can compound significantly over time. A top-up of £150 per week amounts to £7,800 per year. Before agreeing, any third party should model the long-term cost with care.

What Should a Top-Up Agreement Include?

A well-drafted top-up agreement between the third party and the local authority should specify:

The exact weekly top-up amount
Who is responsible for payment and in what form
The payment schedule (typically monthly in advance)
The review date and process for adjusting the amount
What happens if the third party can no longer afford to pay
Whether the care home itself has agreed to the arrangement
Exit provisions if the resident moves home or their needs change

Do not sign any top-up agreement without reading these terms carefully. If the care home rather than the local authority, is asking you to sign directly with them, seek clarification. The formal agreement should be with the council.

"We always tell families: don't feel rushed into signing anything. Read it properly. Ask us to walk you through it. The right care home will give you time to make that decision properly."

What Happens If a Third Party Can No Longer Afford the Top-Up?

This is one of the most common and most distressing situations families face. Under the statutory guidance to the Care Act 2014, if a third party can no longer sustain top-up payments, the following options arise:

The resident may need to move to a care home within the council's standard rate, unless an alternative funder can be found.
The local authority may review the personal budget upwards if needs have increased.
The care home may agree to reduce its fee to meet the council rate and retain the resident.

Councils are expected to handle these situations with sensitivity and to work with families to find a solution before a move is required. However, the default position if no solution is found, is that the resident moves to a suitable alternative placement funded within the personal budget.

This underlines why it is so important to assess the sustainability of a top-up arrangement before committing. A top-up that is manageable today must remain manageable in three, five, or ten years' time.

Top-Up Fees vs. Care Home Fees: What's the Difference?

It is easy to conflate top-up fees with the broader question of who pays for care. The distinctions matter:

Self-funders pay the full care home fee directly and are not subject to top-up arrangements, because local authority funding is not involved. To learn more about funding your own care, see our dedicated guide.
Local authority-funded residents have their assessed needs met by the council up to its usual cost ceiling. If they choose a more expensive home by preference, top-up fees bridge the gap.
NHS Continuing Healthcare (CHC) fully funds placements for individuals whose primary care need is health-related. Where CHC is in place, top-up fees cannot be charged for NHS-funded elements. Families should check eligibility for NHS Continuing Healthcare before assuming a top-up is required.

Understanding which funding route applies to your loved one is the essential first step before any top-up conversation takes place. Our guide to paying for care home fees explains the full picture.

Practical Steps Before Agreeing to a Top-Up Fee

Confirm the local authority's usual cost ceiling for your loved one's assessed needs in writing. This is your baseline.
Request a full care needs assessment if one has not already been carried out. The personal budget must be set at a level sufficient to meet assessed needs not simply based on what the council prefers to spend.
Ask the local authority to identify at least one suitable care home within its standard rate. If it cannot, there may be grounds to challenge the rate.
Model the long-term affordability of the top-up. What happens if circumstances change such as redundancy, bereavement, ill health?
Read the top-up agreement in full before signing. Seek advice from a financial adviser, social worker, or the charity Carers UK if anything is unclear.
Ask whether the top-up amount is fixed or subject to annual increases. Care home fees typically rise each year; understand what that means for your commitment.
Explore whether the proposed home qualifies for any enhanced funding. For example, whether dementia-specific features might justify a higher personal budget from the outset.

Frequently Asked Questions About Care Home Top-Up Fees

Can a care home ask me to pay a top-up fee directly?

No. Under statutory guidance, the formal top-up agreement should be between the third party and the local authority not the care home. The care home may be involved in discussions, but the contract is with the council.

Are top-up fees the same as care home fees?

No. Care home fees cover the full cost of care. Top-up fees are only the difference between what the local authority agrees to pay and the total weekly fee. They apply only when local authority funding is involved.

Can top-up fees be stopped?

Yes. A third party can give notice that they can no longer pay. The local authority must then work with all parties to find a solution, which may include a move to a home within the standard rate, if no alternative funding can be identified.

Do top-up fees affect a resident's personal allowance?

No. The resident's personal expenditure allowance currently set at a minimum of £30.15 per week in England, is protected and cannot be used to meet top-up fees.

Can I challenge the local authority's usual cost ceiling?

Yes. If you believe the personal budget is set too low to fund appropriate care, you can challenge this formally. The Care Act 2014 requires the personal budget to be sufficient to meet assessed care needs, and a care needs assessment can be requested at any time.

What is a Deferred Payment Agreement and how does it relate to top-up fees?

A Deferred Payment Agreement (DPA) lets a resident use the value of their home to fund care, with repayment deferred until the property is sold. It is the only circumstance in which a local authority-funded resident can legally pay their own top-up fee.

Are top-up fees tax-deductible?

No. Top-up fees paid by a third party are not tax-deductible in the UK. They are treated as a personal financial contribution with no tax relief.

Speak to the Ashberry Care Homes Team

Top-up fees are one of the most misunderstood aspects of care funding and one of the most consequential. The conversations that matter most happen before an agreement is signed, not after.

Our team across all Ashberry homes from Holmer Court in Hereford to Meadowview in Wolverhampton are experienced in supporting families through exactly these conversations. We can help you understand what questions to ask, what to look for in an agreement, and how to plan sustainably for the years ahead.

Make an enquiry with our team today, there's no obligation, and no rush. Just honest, straightforward guidance from people who care.

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