Home Care Cost Per Hour 2026/27: What an Hour Actually Costs You to Deliver

What does an hour of home care actually cost to deliver in 2026/27?

Delivering one hour of home care in England costs a compliant agency roughly £32.70 in the 2026/27 tax year, and the Homecare Association sets £34.42 as the minimum price a provider needs to charge to stay legal, safe and solvent. The carer's contact-time wage of £12.71 is barely more than a third of that number. Everything else is the machinery that gets a trained, insured, DBS-checked carer to a front door on time.

Most agency owners we speak to know their pay rate and their charge rate. Far fewer can tell us, without opening a spreadsheet, what an hour costs them by the time travel is paid, holiday is accrued and the registered manager's salary is spread across the rota. That gap in visibility is the single biggest reason home care agencies find themselves busy, growing and still short of cash at month end.

Two things changed on 6 April 2026 that pushed this number up sharply. The National Living Wage rose to £12.71 an hour for workers aged 21 and over. Statutory Sick Pay lost its three waiting days and its lower earnings limit, so every carer now qualifies from day one of absence regardless of how few hours they work. In a sector built on part-time and variable-hours staff, that second change is not a rounding error.

Our team works with CQC registered home care providers across London and the South East, and this article is the model we build with them. If you want the wider picture of how a specialist supports a home care business, our healthcare and social care accountants page sets out what that looks like month to month.

How much of the hourly rate goes on the carer?

About £21.02 of every delivered care hour is direct carer cost, which is roughly 64 percent of the total. That figure is not the wage. It is the wage plus every statutory cost that attaches to the wage, and it is the part most spreadsheets get wrong.

Here is how it stacks up for a carer paid the National Living Wage in 2026/27, expressed per hour of delivered care rather than per hour of paid time:

• Contact-time pay, £12.71. The National Living Wage for workers aged 21 and over from 6 April 2026.
• Paid travel time, £2.54. Roughly 12 minutes of travel for every hour of care on a reasonably tight urban round. Travel between calls is working time and must be paid.
• Holiday pay, £1.84. Statutory 5.6 weeks equates to 12.07 percent of hours worked, and it accrues on travel time too.
• Employer National Insurance, £2.03. Secondary Class 1 runs at 15 percent on earnings above the £5,000 Secondary Threshold, which works out at roughly 11.9 percent of a full-time carer's total pay.
• Pension, training and absence cover, £1.15. Auto-enrolment at 3 percent of qualifying earnings above £6,240, plus paid supervision, refresher training and the cost of covering sickness.
• Mileage, £0.75. What a typical urban round reimburses per delivered hour.

Notice what the wage rise does to everything below it. When £12.21 became £12.71, holiday pay, employer NIC and pension all rose in lockstep, because each is calculated as a percentage of pay. A 4.1 percent headline wage increase produced a bigger increase in total employment cost. Any rate negotiation that only uplifts you by the headline wage percentage leaves you worse off than you were.

Travel time is where the real money and the real risk sit. Pay it properly and it costs you £2.54 an hour. Fail to pay it and you have a National Minimum Wage breach that HMRC can look back six years on, with penalties of up to 200 percent of arrears and public naming. We have written up the mechanics separately in our guide to the minimum wage averaging trap for domiciliary carers, and HMRC's own position is set out in its guidance on calculating the minimum wage.

Which costs do home care agencies forget to put in the rate?

Four costs get left out of hourly rate calculations more often than any others, and together they are worth several pounds an hour. None of them are exotic. They are simply invisible unless someone deliberately allocates them across delivered hours.

Statutory Sick Pay is now a genuine line item. From 6 April 2026 the three unpaid waiting days are gone and the lower earnings limit no longer applies, so SSP is payable from the first qualifying day for every employee, at 80 percent of average weekly earnings or the flat weekly rate, whichever is lower. Agencies running large part-time rotas have gone from paying SSP rarely to paying it routinely. Acas has published a clear summary of the 2026 changes.

Mileage is under-reimbursed almost everywhere. The HMRC approved mileage rate rose to 55p per business mile from 6 April 2026, the first change in over 13 years, having sat at 45p since 2011. Plenty of agencies are still reimbursing 25p or 30p. Anything you pay below 55p is not saving you money in the way it looks: the carer can claim tax relief on the shortfall, and a below-market mileage rate is one of the loudest reasons carers leave for the agency down the road.

Recruitment and turnover cost is a delivery cost. DBS checks, induction training, shadowing shifts and the productivity lost while a new carer builds a round all belong in the hourly rate. Sector turnover means most agencies replace a meaningful share of their workforce every year, and the cost lands somewhere. Spreading it across delivered hours is more honest than treating it as an occasional shock.

The Employment Allowance may not be yours to claim. This one catches people out. Employment Allowance takes up to £10,500 off your employer National Insurance bill, but HMRC's eligibility rule says you can only claim if you do less than half your work in the public sector, and it names local councils and NHS services specifically. A home care agency whose hours are predominantly local authority funded sits directly in that question. Get it confirmed in writing rather than assumed, because an allowance claimed in error is recovered with interest.

What does it cost to run the business behind the care hour?

Running a compliant home care business costs roughly £11.68 per delivered hour, which is more than half again what you pay the carer in contact time. This is the block agency owners underestimate most, usually because it is paid monthly from the business account rather than weekly through payroll, so it never feels like part of the hourly cost.

What sits inside it:

• Registered manager, care coordinators and on-call, around £5.10 an hour. CQC requires a registered manager, and a rota does not build itself. Most agencies need roughly one coordinator per 700 to 900 delivered hours a week, plus paid out-of-hours cover.
• Office, insurance, CQC fees, DBS and software, around £4.20 an hour. Premises, employer's and public liability cover, professional indemnity, the annual CQC fee, DBS checks, care planning and rostering software, and phones for the field team.
• Compliance, quality, training delivery and finance, around £2.38 an hour. Spot checks, supervisions, audits, policy reviews, mandatory training delivery, payroll processing, bookkeeping and year-end.

One structural point matters here and is easy to miss. Care delivered by a CQC registered provider is exempt from VAT under the welfare exemption in HMRC's VAT Notice 701/2. Exempt is not the same as zero-rated. You charge no VAT on your hourly rate, and in exchange you cannot recover the VAT you pay on software, vehicles, training, insurance and professional fees. That irrecoverable VAT is a real cost that has to live inside the £11.68, and it is why a home care agency's overheads run higher than a comparable non-care business of the same size. We unpack the detail in our guide to whether domiciliary care is VAT exempt.

Payroll is the other structural cost worth naming. Running weekly or fortnightly pay for 50 carers with variable hours, travel time, mileage and shift premiums is not the same job as running monthly salaries for an office of 10, which is why generalist firms tend to quote it wrong. Our payroll and PAYE service is built for exactly this pattern.

Why is the average council rate £9 below the cost of delivery?

Councils in England pay an average of £25.05 an hour for home care in 2026/27, against a minimum sustainable price of £34.42, leaving a shortfall of £9.37 on every commissioned hour. The gap exists because adult social care budgets have not moved at the pace of the National Living Wage and the employer National Insurance changes, and the Homecare Association has been publishing the arithmetic on this for years.

No agency survives a 27 percent shortfall by absorbing it. The gap gets closed somewhere, and the places it usually gets closed are worth naming plainly, because every one of them is a risk you are carrying rather than a saving you are making:

• Travel time is paid at a flat rate or a fixed allowance rather than actual time, which is where minimum wage exposure builds.
• Mileage is reimbursed below the 55p approved rate, which shows up later as recruitment cost.
• Rounds are packed so tightly that call times slip, which shows up in the next CQC inspection.
• Management cover is thinned, which shows up as a burnt-out registered manager and a resignation you did not plan for.
• Surplus goes to zero, which means no reinvestment, no buffer and no sale value in the business.

Here is the operator-level point. If council work is 70 percent of your hours and it is priced below cost, then your private clients are not simply more profitable, they are subsidising the council work. Very few agencies see this in their accounts, because most management reporting shows one blended gross margin rather than margin by payer. Splitting revenue and cost by contract is a small piece of bookkeeping work with a large effect on decision making. Our breakdown of local authority versus private fees goes further into how the payer mix changes cashflow and bad debt.

What should a home care agency charge per hour in 2026/27?

Price from your own cost per delivered hour and add the margin you need, rather than pricing from what the agency down the road charges. For most English providers the true cost lands between £30 and £36 an hour in 2026/27 depending on round density, travel patterns, wage rates above the statutory floor and how lean the management structure runs. London providers sit at the upper end, because travel is slower and pay has to compete with the London labour market.

Three practical rules make the number defensible:

1. Calculate cost per delivered hour, not per paid hour. Paid hours include travel and training. Delivered hours are what you invoice. Dividing total cost by paid hours flatters your position by 15 to 20 percent, which is exactly the error that makes an unprofitable contract look acceptable.
2. Model shorter calls separately. A 30-minute call carries almost the same travel and coordination burden as a 60-minute one, so its cost per delivered hour is materially higher. Agencies with a lot of short calls need a rate that reflects that, or a policy of clustering short calls geographically.
3. Uplift for the full cost of a wage rise, not the headline percentage. When the wage moves, holiday pay, employer NIC and pension move with it. Ask commissioners for the loaded increase and show the arithmetic. The Homecare Association's published minimum price exists precisely so providers can point at an independent number in that conversation.

Where you land relative to that £34.42 floor tells you which conversation to have next. Below it on the majority of your hours, and the priority is rate negotiation and payer mix rather than cost cutting, because there is very little left to cut without creating regulatory risk. Comfortably above it, and the question becomes what to do with the surplus. Our note on what a healthy domiciliary care margin looks like covers that side. You can also sense-check your own position in a free 15-minute call with LOYALS.

What this means for you: what to do about your own cost per hour

Work through these six steps and you will have a defensible cost per hour inside a fortnight. Most agencies find something in the first two that changes a pricing decision straight away.

1. Pull contact hours and paid hours for the same month. Rota system for one, payroll for the other. The gap between them is your travel, training and absence load, and it is usually bigger than expected.
2. Add the full employment on-costs. Holiday at 12.07 percent, employer NIC at 15 percent above £5,000, pension at 3 percent of qualifying earnings above £6,240, plus your actual SSP spend since April 2026.
3. Allocate every overhead across delivered hours. Registered manager, coordinators, on-call, office, insurance, CQC fee, software, training and professional fees. Include the VAT you cannot recover.
4. Split the result by payer. Council, NHS or ICB, and private. One blended margin hides which contracts are funding which.
5. Compare against £34.42. Use the published minimum price as the external benchmark in every rate conversation with a commissioner, and put the loaded wage increase in writing.
6. Check the Employment Allowance question properly. If more than half your work is local authority funded, get your eligibility confirmed before the next claim rather than after.

None of this is complicated accounting. It is allocation, done once properly and then maintained monthly. The agencies that do it negotiate from evidence instead of instinct, and they know months in advance which contracts are worth renewing.