Direct Payments Explained: How to Get Council Funding for the Provider You Want

Most families researching home care fall into one of two camps: “the council might pay something so we should apply” or “we’ll pay privately for the quality and choice we want”. There’s a third option that combines both, and it’s significantly under-used: Direct Payments.

Direct Payments are council-funded care money that you control. The local authority assesses your loved one’s needs, calculates a personal budget, and then pays the cash directly to them (or to a managed account on their behalf). You then commission care from any CQC-registered private provider — including the providers with the continuity, flexibility, and quality that council-contracted care often lacks.

This guide explains how Direct Payments actually work in 2026, who qualifies, how to apply, what you can spend the money on, and the common pitfalls families don’t see coming.

The Quick Summary

• Direct Payments are council-funded care, paid as cash for you to spend on the provider of your choice.
• Anyone eligible for council-funded care can request them instead of council-arranged care.
• You can use the money on any CQC-registered provider, including private providers like Oath Healthcare.
• Top-up with private money if the council budget doesn’t cover what you need — common and entirely legitimate.
• The council still does the means test and care assessment — this isn’t a way around eligibility, it’s a way to take control of how the money is spent.

What Are Direct Payments, Exactly?

Direct Payments were introduced by the Community Care (Direct Payments) Act 1996 and now sit within the framework of the Care Act 2014. The principle is “personalisation” — the idea that the person needing care knows best how to spend the support budget allocated to them.

The mechanics are straightforward:

1. The local authority does a needs assessment (free) to identify eligible care needs under the Care Act.
2. They do a financial assessment (free) to determine how much (if anything) you contribute.
3. They allocate a personal budget — the total amount calculated to meet eligible needs.
4. You request to take this as a Direct Payment rather than letting them arrange care.
5. The council pays the budget into a dedicated account (yours, a family member’s as appointee, or a managed account run by a third-party support service).
6. You commission care directly from your chosen provider, paying their invoices from the Direct Payment account.

Why Direct Payments Are So Useful

1. Choice of provider

Council-arranged care is limited to providers on the council’s contracted list. Direct Payments let you choose any CQC-registered provider, including those known for continuity, specialist dementia care, complex care expertise, or any specific quality you value.

2. Flexibility

Council-arranged care is usually fixed slots: 30 minutes morning, 30 minutes evening. With Direct Payments, you can structure care around your relative’s actual life — longer visits less often, varied visit times, occasional extra hours when needed.

3. Continuity

One of the biggest complaints about council-contracted care is rotating carers. With Direct Payments, you can choose providers who guarantee small consistent care teams (typically 2–3 carers per client). For dementia or anxiety-prone clients, this single factor often transforms care.

4. Top-up freedom

Council personal budgets are calculated on minimum eligible needs, not what families actually want. Direct Payments let you top up with private money to get the care you actually need without bureaucratic friction.

5. Single coordinated care

If the council arranges some care and you privately pay for more, you can end up with two providers doing different visits with different carers. With Direct Payments, you have one provider managing the whole package — much smoother.

Who Qualifies?

Anyone who:

• Has eligible care needs under the Care Act 2014 (assessed by the local authority)
• Is not excluded for other reasons (e.g. court-ordered exclusions for fraud)
• Has the mental capacity to manage the payment, OR has a suitable person to manage it on their behalf

If your relative lacks mental capacity, a family member, attorney under Lasting Power of Attorney, or court-appointed deputy can receive Direct Payments on their behalf as an “appointee” or “suitable person”.

How to Apply for Direct Payments

Step 1: Request a Care Act needs assessment

Contact your local authority’s adult social care team. Every council has slightly different processes — Cambridgeshire, Essex, Gateshead, Suffolk, Redbridge, Nottinghamshire all have online and phone routes. The assessment is free and is your statutory right under the Care Act.

The needs assessment looks at: personal care, mobility, nutrition, household tasks, social interaction, mental health, and risk. It produces a written summary of eligible needs.

Step 2: Financial assessment

If needs are eligible, the council does a financial assessment (means test). The 2025–2026 thresholds:

• Capital under £14,250 — council pays in full (subject to income contribution)
• Capital £14,250–£23,250 — sliding contribution
• Capital above £23,250 — full self-funder

For home care purposes, the value of the main home is typically excluded from the capital calculation (this differs from residential care).

Step 3: Personal budget allocated

The council calculates the personal budget — the total cost of meeting eligible needs. This often disappoints families because councils calculate to the minimum eligible level, not what families want. You can challenge the calculation; you can also top up privately.

Step 4: Request Direct Payments

This is the critical step. When the council offers care, ask explicitly: “I’d like to take this as a Direct Payment so I can choose my own provider.”

Some social workers will help. Some will discourage you, often unconsciously, because Direct Payments are more administratively complex for the council. Be persistent — Direct Payments are a statutory right under section 31 of the Care Act 2014.

Step 5: Set up the payment account

You’ll need a dedicated account — typically a separate bank account or a “managed account” run by a Direct Payments support service contracted by the council. The managed account option is much easier (the support service handles invoicing, payroll if needed, and council reporting) and is widely used.

Step 6: Choose your provider

Now the fun part. You have an annual care budget. Pick a CQC-registered provider you actually want, agree the care plan, and start care. Most reputable providers (including us) handle Direct Payment invoicing routinely.

What You Can Spend Direct Payments On

Direct Payments must be spent on meeting the assessed care needs. The flexibility within that is significant:

• Care from any CQC-registered home care provider — visiting care, live-in care, dementia care, complex care.
• Direct employment of a personal assistant — possible but adds significant employment law responsibility (PAYE, holiday pay, sickness, employer’s liability insurance). Most families opt against this.
• Equipment that supports independence (within limits agreed with the council).
• Day services or social inclusion activities if these meet assessed needs.
• Short breaks/respite care.

What you cannot use Direct Payments for: anything not related to the assessed needs, illegal services, gambling, or anything excluded by the council in your individual agreement.

Topping Up with Private Money

Council personal budgets are notoriously tight. If you want more care than the council assessed (e.g. an extra weekend visit, longer visit duration, or more carer continuity than the council rate covers), you can top up with private money.

This is entirely legal and very common. You essentially have one provider, one care plan, one carer team — but two funding sources flowing into the same payments. Most providers (us included) issue separate invoices for the council-funded portion and the private top-up so the accounting stays clean.

Common Pitfalls Families Don’t See Coming

1. The hourly rate the council pays may be lower than the provider’s standard rate

Councils often calculate Direct Payments at their contracted rate (e.g. £18–£20/hour) rather than the market rate. If your chosen provider charges £24/hour, you cover the difference privately.

2. Reporting requirements

You need to keep records of how the money was spent and submit returns to the council (typically quarterly). A managed account service handles this for you. Without one, the bookkeeping is real work.

3. Reviews can reduce the budget

Care needs and budgets are reviewed annually (sometimes more often). If the council assesses needs as reduced, the budget reduces too. If your needs have actually increased, push for a re-assessment.

4. Some social workers don’t volunteer Direct Payments

You often have to ask. Some councils have actively reduced Direct Payment uptake by making the application path frictional. Be persistent and quote the Care Act if needed.

5. Care home fees are not generally covered

Direct Payments are typically used for care at home, not for residential care home fees. Different rules apply for residential placements.

Switching Providers Using Direct Payments

One of the powerful aspects of Direct Payments: if your current provider doesn’t deliver, you can switch. Most home care contracts can be ended with 7–14 days’ notice. You then commission a different provider and the Direct Payments continue without council involvement.

Compare this to council-arranged care, where switching providers means going back to the council, navigating their bureaucracy, and accepting whatever they offer next. Direct Payments put you in control.

Frequently Asked Questions

Can I use Direct Payments to pay a family member to care?

Generally not — councils discourage paying spouses, parents, or co-resident family. There are exceptions (e.g. for certain disability or cultural reasons) but most councils require the money to be spent on professional care.

Do I have to be the budget-holder myself?

No. If the person needing care lacks capacity to manage the payment, a family member, attorney, or appointee can manage it on their behalf. Many adult children manage their parents’ Direct Payments.

What if I’m refused Direct Payments?

The council must provide reasons in writing. You can challenge the decision through the council’s complaints process, then to the Local Government and Social Care Ombudsman. Refusals are uncommon when the request is straightforward.

Can I use Direct Payments alongside NHS Continuing Healthcare?

You can have a similar arrangement under CHC called a Personal Health Budget (PHB). PHBs work the same way — fully NHS-funded, you choose the provider. If your relative is on the borderline, get them assessed for CHC because it removes the means-test entirely.

How long does it take to set up Direct Payments?

From initial council contact to first payment: typically 6–12 weeks. The needs assessment alone often takes 4–6 weeks. If care is urgent, start care privately while the application proceeds, then transition to Direct Payments funding when set up.

Can my chosen provider deal with Direct Payments?

Most reputable home care providers can. Ask explicitly: “Do you accept Direct Payments?” and “Can you invoice my managed account?” The answer should be a confident yes.

The Bottom Line

Direct Payments are the bridge between council-funded care and private-quality care. If your relative qualifies for council funding but you want choice, continuity, and flexibility, Direct Payments are almost always the right answer.

• Request a Care Act needs assessment from your local authority.
• Ask explicitly for Direct Payments instead of council-arranged care.
• Use a managed account service for ease of administration.
• Choose a provider known for continuity and quality.
• Top up privately if the council budget doesn’t cover what you need.

For more on the broader private vs council decision, see our private vs council home care guide. To discuss Direct Payments specifically with our team — including which councils we work with and what’s involved in invoicing your managed account — call us on 01223 755 887 or visit our private clients page.