Dementia Tax Explained | Do You Have To Pay It?

Dementia tax refers to the cost of dementia care faced by people living with dementia and their loved ones. Unlike other long-term medical conditions such as cancer and Parkinson’s disease, people living with dementia often have to pay for their care, whether this is in a dementia care home or through care at home. Whether you pay depends on the value of your capital.

Here, we’ve explained what dementia tax is in the UK and how it affects you. We’ve also explained the funding support available to people living with dementia, whether you’ll need to sell your home to pay for dementia care and how you can use our website to find dementia care near you.

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In this article:

1. What is dementia tax?
2. Do people living with dementia have to pay care home fees?
3. Other funding support for people living with dementia
4. Do people living with dementia need to sell their homes to pay for care?
5. Council tax discount for people living with dementia
6. Find dementia care near you

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What Is Dementia Tax?

The dementia tax is a way of referring to the cost of dementia care that many people living with dementia and their loved ones face. It also refers to the challenges of funding dementia care needed, so the person living with dementia can be properly looked after and maintain their independence as much as possible.

Healthcare in the UK is free for many medical conditions, such as heart disease, Parkinson’s disease and cancer, with this care being paid for by the NHS. However, dementia care isn’t always covered by the NHS, which is why people usually pay for dementia care in a care home or through care at home.

People either pay for dementia care themselves, or through other methods such as funding support from their local authority, NHS continuing healthcare, NHS-funded nursing care or with the assistance of various benefits.

Looking after someone living with dementia often requires daily support from professional carers who can provide round-the-clock assistance with things like personal care and specialist support.

Whether you’ll pay for your own dementia care or if you’ll pay yourself depends on the total value of your savings and income (and assets if support in a care home is needed). We’ve explained these funding thresholds later on.

How much is the dementia tax?

The dementia tax isn’t a specific amount of money. Instead, it refers to the cost of dementia care for people living with a type of dementia such as Alzheimer’s disease.

Our internal data shows that the average cost of privately funded dementia care in a UK care home is:

The Alzheimer’s Society estimates that the current annual cost of dementia to the UK is £34.7 billion. This works out at an average of £32,500 per person.

Right now, around 2/3 (so just over £23 billion) of this is paid by people with dementia and their families. This includes paying for private social care in a care home or at home, as well as providing unpaid care.

£9.3 billion of this is through private social care, such as in a care home or at home, while £13.9 billion is attributed to unpaid dementia care given by family members and others. Providing this care can be difficult for unpaid carers, as they have to juggle work and their social lives on top of caring responsibilities. Specialist dementia care may also be needed, which an unpaid carer isn’t able to give.

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Do People Living With Dementia Have To Pay Care Home Fees?

Usually, people living with dementia have to pay for their care home fees. This depends on the outcome of a financial assessment. This works out the total value of your savings, income and assets. If you require care at home, assets such as your house won’t be included.

Each UK country has different funding thresholds. If you’re below the lower threshold, you’ll qualify for full funding support from your local authority. If you’re between the upper and lower threshold, you’ll qualify for partial support. If you’re above the upper threshold, you’ll be classed as a self-funder, so you’ll have to pay for your dementia care.

Here are the UK savings thresholds for 2024/2025 to pay for dementia care:

Other funding support is available to people living with dementia, and we’ve explained these alternatives below.

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Other Funding Support For People Living With Dementia

NHS continuing healthcare

NHS continuing healthcare is for people assessed as having a ‘primary health need’. People living with a type of dementia such as Alzheimer’s disease are often eligible for this.

If eligible, the care and support you need will be arranged and entirely funded by the NHS, including any care within a care home.

NHS-funded nursing care

NHS-funded nursing care is for people who receive nursing care in a nursing care home. Here, the NHS will pay towards your loved one’s nursing home fees. This money is usually sent directly to the home.

This isn’t a means-tested form of funding, so you could be eligible regardless of your financial situation.

NHS-funded nursing care rates vary throughout the UK. In England, for 2024/2025, this is £235.88 a week at the standard rate and £324.50 a week at the higher rate.

You could be eligible for NHS-funded nursing care if you’re living in a care home that provides nursing care and you don’t get NHS continuing healthcare (you can only receive one of these). People living with dementia often receive nursing dementia care, so you or your loved one could be eligible for this.

Dementia benefits

If you’re living with dementia, you or your loved one could be eligible for several benefits.

You could get one of Attendance Allowance, Disability Living Allowance or Personal Independence Payment (depending on whether you’re above or below the State Pension age). These benefits are for people living with a disability or medical condition such as dementia that affects their daily life and means they require care and support.

Other benefits are:

• Carer’s Allowance (for people who look after someone living with dementia)
• Universal Credit or Employment and Support Allowance (for people who are working age)
• State Pension and Pension Credit (for people who have reached State Pension age)
• Housing Benefit
• A council tax reduction

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Do People Living With Dementia Need To Sell Their Homes To Pay For Care?

If somebody needs care at home, their home won’t be counted during a financial assessment. If care in a care home is needed, it will be included. There can be some exceptions to this, such as if somebody like your child continues to live in your home.

If your home is included in a financial assessment, you’ll almost definitely be above your country’s upper threshold, meaning you’ll pay for your own care. At this point, people often need to sell their homes to pay for care, unless they have enough money to pay without needing to sell.

When moving into a care home, the value of your property might not be included in the financial assessment for the first 12 weeks, giving you time to sell your home.

There are other ways to pay for care as well, including:

• Deferred payment agreements
• Equity release
• Immediate needs annuity

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Council Tax Discount For People Living With Dementia

In England, Scotland and Wales, you could be entitled to a Council Tax discount or exemption if you’re living with dementia. This is a 25% discount where two people are living together and one person meets the criteria, or a complete exemption where somebody with dementia lives by themselves.

Claiming this discount or exemption could save you thousands of pounds, so it’s definitely worth doing.

You could be eligible if the following apply:

• You’re medically certified as having a permanent ‘severe mental impairment’ such as dementia
• You’re entitled to a disability benefit such as Attendance Allowance, Personal Independence Payment or Disability Living Allowance

The exact process to claim varies from location to location. You can find your local council to check their procedures for claiming. With that said, here’s the outline of how to claim:

1. Get a dementia diagnosis. You may need to attach a written diagnosis with your claim, or in other cases, your doctor will be contacted for confirmation after you’ve given their details

2. Get a claim form to apply for a reduction. You can get a claim form through your local authority. Use the GOV.UK ‘apply for council tax reduction’ service to find contact details

3. Fill in this form. You may need to supply evidence, such as proof that you receive a relevant benefit

4. If you want to apply for a backdated discount, you’ll need to do this separately. You can do this by writing to your local authority and explaining your circumstances. You can attach your claim form letter for added context

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Find Dementia Care Near You

Dementia care homes

Through Lottie, you can find dementia care homes throughout the UK. You can also request a free list of dementia care homes from our knowledgeable care experts, who will share homes matching your specific requirements, including care needs, budget and location.

The care homes we list provide a fantastic standard of care and are also packed with state-of-the-art facilities like cosy communal lounges, dining rooms, cafés, restaurants and activity rooms. You’ll also find dementia-specific facilities and features such as sensory gardens, reminiscence rooms and key-coded doors.

Dementia care at home

You can also use Lottie to find dementia care at home. We’re partnered with the country's best home care agencies across domiciliary (hourly) care, live-in care and overnight care. You can also request a free list of home care agencies matching your requirements.

Many of the home care agencies we’re partnered with provide specialist dementia care, including for people living with early-stage or late-stage dementia, or a specific form of dementia like Alzheimer’s disease.

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Lottie matches care seekers with the best dementia care homes for their needs. You can also request a free dementia care home shortlist from our care experts, who will share homes matching your budget and location.