Permanent residential deferred payment calculation and rental income calculation
Mrs Yorke lives alone in a bungalow which she owns outright. She has recently suffered a stroke and has not fully recovered. Following an assessment in hospital, it was decided that her care needs would be best met in a residential care home.
Mrs Yorke and her family viewed several care homes and chose a garden-view room costing £1,950 per week.
As Mrs Yorke owns her property, she is required to contribute towards the cost of her care. She is eligible for the 12-week property disregard and has been offered a Deferred Payment Agreement under the Universal Deferred Payments Scheme.
After receiving independent financial advice, Mrs Yorke accepts the Council’s offer of a deferred payment.
Mrs Yorke’s financial assessment and deferred payment calculation are set out below.
Step 1: Weekly income calculation
Mrs Yorke receives:
- State Pension: £240.00
- Private Pension: £200.00
- Attendance Allowance: £110.40
Total weekly income: £240.00 + £200.00 + £110.40 = £550.40.
Step 2: Capital and property value
Mrs Yorke has the following savings:
- Current account: £2,000.00
An independent valuation shows that her property is worth £290,000.
The maximum amount Mrs Yorke can borrow from the Council is calculated as:
£290,000 (Property value) − £29,000 (10%) + £2,000 (Savings) − £14,250 = £248,750.
This amount is available over 139 weeks:
£248,750 ÷ 139 = £1,789.56 per week.
Step 3: Disposable Income Allowance and Personal Expenditure Allowance
Mrs Yorke may retain:
- Disposable Income Allowance (DIA): £144.00
- Personal Expenditure Allowance (PEA): £37.70
She chooses to keep the full DIA to help maintain her property.
Step 4: Income contribution calculation
Mrs Yorke’s weekly contribution from her income is calculated as follows:
£240.00 + £200.00 + £110.40 − £144.00 − £37.70 = £368.70.
Weekly income contribution: £368.70.
Step 5: Deferred payment calculation
The weekly cost of Mrs Yorke’s chosen care home is £1,950.00.
The amount to be deferred each week is:
£1,950.00 − £368.70 = £1,581.30.
The maximum available deferred amount is £1,789.56 per week.
As £1,681.30 is less than £1,789.56, the cost of care is affordable and sustainable.
Mrs Yorke may also choose a care home costing up to £2,158.26 per week in the future.
Step 6: Property rental income calculation
Mrs Yorke decides to rent out her property through a letting agency.
Her monthly rental income is:
- Gross rental income: £1,250.00
- Agency fee (15%): £187.50
- VAT on agency fee (20%): £37.50
Total deductions: £187.50 + £37.50 = £225.00.
Net rental income: £1,250.00 − £225.00 = £1,025.00.
Mrs Yorke chooses to keep 10% of her net rental income:
£1,025.00 × 10% = £102.50.
Rental income added to contribution: £1,025.00 − £102.50 = £922.50 per month.
Final result: Contribution and sustainability
Mrs Yorke contributes £368.70 per week from her income towards her care.
She defers £1,581.30 per week against her property.
She also receives £922.50 per month from rental income, which is added to her contribution.
This reduces the amount borrowed against her property and helps her equity last longer. Her deferred payment arrangement remains affordable and sustainable.