Raising Private Care Home Fees for 2027/28: The Numbers and the Letter

The short answer: how much should private care home fees rise for 2027/28?

A defensible private care home fee increase for 2027/28 usually lands between 4 and 7 percent, which for a London home is roughly £55 to £110 a week per bed. That range is the answer most owners want, but it is the wrong place to start. The percentage should fall out of a model, not go into one.

Here is the distinction that matters. A round-number rise, say "we will do 5 percent again this year", feels safe and is almost always wrong in one direction or the other. Some years 5 percent leaves you carrying a loss on every occupied bed. Other years it overshoots and hands a family a rise you cannot justify if they push back. The homes that get this right build the cost to run one bed for one week, add the margin they need to stay viable, and read the fee increase straight off the difference.

This is the private self-funder side of the fee question, and it is a separate job from your council talks. If you also take local authority placements, the annual uplift you negotiate with the council runs on a different track with different rules, and we cover that in our companion guide on the cost of care model and fee uplift negotiation for 2027/28. This article is about the fees you set for people who pay for their own care, the cost basis behind them, and the letter that tells residents and families the fee is changing. If you want the specialist background on the numbers behind a home, our care home accountants page pulls it together.

Get the model right and the letter becomes easy, because every figure in it is one you can defend. Get it wrong and you are either underpricing your own home or writing a letter you cannot stand behind. So we will do the model first, then the letter.

What is driving your costs into 2027/28

Your costs are climbing for two reasons: pay, and everything else. Pay is by far the bigger of the two, because staffing is roughly 60 percent of a typical care home's cost base, so anything that moves the wage bill moves the whole home.

The single dominant driver is the National Living Wage. From April 2026 the statutory minimum for workers aged 21 and over rose to £12.71 an hour, a 4.1 percent increase confirmed by the government when it accepted the National Living Wage increase to £12.71 an hour from April 2026. That headline rate is only the start of the effect. When the floor rises, the differentials above it have to move too, or a senior carer ends up on the same rate as the new starter she supervises. Add employer National Insurance and pension on top of every uplifted hour, and a 4.1 percent rise in the legal minimum can push your actual staff cost up by 5 percent or more once the knock-on effects are counted. Our team of qualified accountants sees this ripple caught late more often than any other line, which is exactly why our care home accountants model the differentials, not just the headline rate.

Everything else is non-pay inflation: food, energy, insurance renewals, agency cover, laundry, maintenance and registration. As at September 2026, ONS consumer price inflation figures put CPI at 2.9 percent in the year to July 2026, with housing and household services among the biggest upward pushes. Care homes rarely track the headline exactly, because energy contracts and insurance renewals move in steps rather than smoothly, but 3 percent is a fair planning assumption for the non-pay half of the base.

The chart below shows how the two lines behave over time. The cost to run a bed climbs every year, with the steepest single jump in 2026 when the new wage floor lands. To hold the same margin, the fee has to climb with it.

Build the number: the cost-per-bed model

Work out what it costs to run one occupied bed for one week, then everything else follows. The cost-per-bed build-up is the backbone of a defensible fee review, and it is the piece most owners skip because it feels like accountancy rather than care. It is worth the hour.

Four inputs feed the model, and each one moves the answer in its own direction. Miss any of them and the number you land on will not survive a conversation with a sharp relative.

Occupancy is the input that quietly does the most damage. Your rent, your registered manager, your night cover and your insurance cost the same whether the home is full or has four empty rooms, so those fixed costs land on every occupied bed. Run at 92 percent and the maths works. Slip to 85 percent for a quarter and the cost per occupied bed jumps, which is why void management belongs in the same conversation as fees. We go deeper on that in our guide to care home occupancy, voids and the accounting behind them.

The target margin is not greed, it is the buffer that keeps the home open. The Care Quality Commission expects providers to be financially viable, and CQC Regulation 13 on the financial position of a provider is the reason a home that runs at zero margin is a home at risk. A surplus of 8 to 12 percent covers refurbishment, sinking-fund repairs, agency spikes and the quiet quarters. Here is an illustrative build-up for a 40-bed London residential home running at 92 percent occupancy.

The value of doing this properly is that you now hold a number you can defend to a resident, a relative or a bank. The reason we push clients onto monthly management accounts is precisely this: the cost per bed changes through the year as pay rates, agency use and occupancy move, and a set of accounts that arrives ten months after the year end is no use when you are setting a fee in October. Live numbers make the fee review a five-minute update rather than an annual scramble.

The uplift maths that holds your margin

Once the base is built, the fee increase is a short piece of arithmetic. Uplift each part of the cost for the real change it is facing, not a single blended guess, then work out the fee that keeps your margin where it needs to be.

Take the illustrative home above, with a total cost of £1,345 a week and a fee of £1,495 that holds a 10 percent margin. Now roll it forward:

• Staff (£980): up around 5 percent once the National Living Wage rise, the differentials above it and employer on-costs are counted. That is about £49 a week.
• Non-pay (£365): up around 3 percent in line with inflation, about £11 a week.
• New total cost: roughly £1,405 a week per occupied bed.
• Fee to hold the 10 percent margin: £1,405 divided by 0.90, which is about £1,561.

So the fee has to rise from £1,495 to about £1,561, an uplift of roughly £66 a week, or 4.4 percent, just to stand still on margin. Notice that the fee percentage (4.4) is lower than the staff percentage (5), because staff are only part of the base. That is the whole point of modelling by line rather than applying one number to everything.

Two things can push the required uplift higher. If occupancy is set to fall, the fixed costs spread over fewer beds and each bed has to carry more. And if you have been under-pricing, holding the margin is not enough, you need a step toward the right level, which usually means a larger rise phased over two reviews rather than one shock. The arithmetic is simple. The judgement about how far and how fast is where an accountant who knows the sector earns their fee.

Private self-funders versus the council route

Your private fee review and your council uplift talks are two different jobs, and treating them as one is a common and costly mistake. A self-funder pays the fee you set. A council pays the fee it agrees, which is often below the true cost of care.

The gap between the two is large and well documented. The Competition and Markets Authority's care homes market study found that self-funder fees were, on average, around 41 percent higher than the fees local authorities paid in the same homes. That is not price gouging, it is cross-subsidy: where councils pay below cost, private residents make up the shortfall, and without it many homes could not stay open. It is uncomfortable, but it is the structure of the market as it stands.

What this means in practice is that the two tracks move on different clocks and different logic. The council uplift is a negotiation, often annual, driven by the local authority's fee-setting cycle and its own cost-of-care exercise, and you argue it with evidence about your actual costs. We cover that route in full in the cost of care model and fee uplift negotiation guide. The private review is yours to run, bounded by your contract and by consumer law rather than by a commissioner. You set it, you justify it, and you communicate it in writing. That letter is where a lot of otherwise well-run homes come unstuck.

The fee-increase letter: what a compliant notice must contain

A fee-increase letter has to do two jobs at once: give residents and families fair, clear notice, and stay inside consumer law. The Competition and Markets Authority is explicit that care homes must treat residents fairly, give upfront information about fees, flag any surprising terms, and handle complaints in a way that is easy to find and use. Its consumer law advice for care home providers is the standard your letter is measured against.

The letter itself is not complicated once you know what belongs in it. A compliant 2027/28 fee-increase notice should contain the following, in plain language:

1. The current fee and the new fee, both stated clearly as a weekly figure, with the cash increase and the percentage shown.
2. The date the new fee starts, giving at least the notice period set out in the residency agreement. Most homes review annually and give at least 28 days, often a full calendar month.
3. The reason for the increase, tied to real cost drivers: the National Living Wage rise, energy, food and insurance. Vague wording invites a challenge; specific reasons close it down.
4. The contract term that allows the change. Your agreement must contain a fair variation term that says fees can change and explains how and when. A term that lets you raise fees by any amount at any time is likely to be unfair and unenforceable.
5. How to raise a question or complaint, with a named contact and a clear route, because the CMA expects your complaints process to be easy to find and use.
6. A warm, human tone. You are writing to a family trusting you with a relative, not issuing an invoice. The letter can be compliant and kind at the same time.

One practical point that saves a great deal of grief: send the letter before, not after, the change takes effect, and keep a copy on the resident's file. If a relative ever questions the rise, a clear letter that sets out the reason and the notice period is your complete answer. A rise applied without notice, or justified only as "rising costs", is the kind of thing that turns into a formal complaint and, occasionally, a refund.

What to do before you send the 2027/28 letter

Do the model first, the letter second, and the year gets a lot calmer. Below is how a specialist care home accountant supports a fee review compared with the two alternatives most owners default to.

The sequence is straightforward. Build the cost per occupied bed with your real staffing and current occupancy. Roll each line forward for the National Living Wage and inflation. Read the fee that holds your margin. Then write the letter, tie the reason to the real drivers, quote the notice period from the agreement, and send it before the change takes effect. LOYALS runs the payroll, bookkeeping and monthly management accounts for private care homes from our King's Cross base, so the cost-per-bed figure behind your 2027/28 letter is one we can produce and stand behind when a relative asks how it was worked out.

If you would rather hand the whole fee review to someone who does it every week, our care home accountants support single homes from £795 a month, larger or nursing homes from £1,295 a month, and small groups from £1,995 a month, with the cost-per-bed model, the payroll and the fee letter all in one place.