Do foster carers pay tax?

The simple answer to the question “Do Foster Carers pay tax” is yes. When you decide to become a foster parent, chances are that questions relating to tax aren’t high on your list of concerns or worries.

At Family Fostering Partners we believe that foster parents should be properly financially recompensed for the important work that they do in looking after children and young people. Ensuring carers are financially recompensed for such work inevitably increases the likelihood that such foster parents will need to pay tax. Any income from fostering (e.g. your fostering allowance) classifies as taxable income. Therefore, you will be liable for any National Insurance contributions due and will need to complete a tax return each year, regardless of whether you've made any money from foster care or not.

Don't panic! When you join Family Fostering Partners as a foster parent, we will be by your side not only to support you and the child or children that you look after, but to also offer advice on questions such as Do Foster Parents Pay Tax. To assist foster carers with tax every foster parent with us receives free membership of FosterTalk. Foster Talk are an independent, not for profit organisation, who will provide you with professional experts to answer any tax, benefits, and National Insurance questions relating to fostering.

What is Qualifying Care Relief?

Qualifying Care Relief is a specialist tax scheme for foster caregivers.

It's a generous and completely bespoke way of calculating how much tax you have to pay, based on the number of young people in your care and any special needs they may have. It applies to any sort of foster care given, e.g. emergency, respite or parent and child.

In a nutshell:

• Each household is exempt from paying tax on any fostering income, up to £19,360 per year.
• You get a fixed tax relief amount per week, per child.

You can find more details about foster care tax arrangements, plus some examples of how they're calculated, on the GOV.uk website.

The Calculations behind the question "Do foster carers pay tax?"

How you calculate the tax you owe from your fostering income can be broken down into three easy steps:

1. 
   

   Add up your annual income from fostering

This figure should include:

• Weekly fostering allowance
• Mileage
• Holidays
• Respite care
• Clothing
• Any other costs incurred for the care given (keep your receipts!)

Once all these figures have been factored in, the final figure is called your 'total income'.

2. 
   

   Figure out your fostering tax relief

You can bring home £19,360 per household per year, tax-free. You then receive an additional weekly allowance per child, variable by age.

Here's an example:

A foster parent looks after one child aged 14 and one aged 7 for a full tax year.

52 weeks x £405 (child under 11) = £21,060

52 weeks x £485 (child 11 and over) = £25,220

Plus £19,360

TOTAL FOSTERING TAX RELIEF = £65,640

This means that a foster parent looking after 1 child under the age of 11 and 1 child over the age of 11 want pay any tax on the first £65,640 of their income.

Don't forget: any child that stays with you, even for a short amount of time, still counts towards your foster tax relief amount, so keep a note of any short stays.

3. 
   

   Totalling your taxable income

This is the easiest step!

£ total income from fostering (step 1)

minus

£ total fostering tax relief (step 2)

equals

Your £ total taxable income

Any figure totalling more than your fostering tax relief will have to have tax paid on it at the current rate. Therefore, to answer the question "Do foster carers pay tax?" you need to calculate the exact amount of income you receive through fostering, and see whether what you’ve earned it is above the taxable income threshold.

Financial benefits in addition to the tax allowance

Every foster parent will benefit from the tax allowance detailed above, however, every agency will have differing rates of pay. At Family Fostering Partners we offer a unique scheme called #BeThereToCare, which is an additional guaranteed income for up to ten weeks for those who are giving up work in order to be able to foster full time. We hope that this financial support will allow more people to be able to welcome their first foster child.

Finally, you may be entitled to some state welfare benefits to help you and your family offer a vulnerable young person the safe, caring and the supportive family environment they deserve. The GOV.uk website has a handy benefits calculator to help you work out what you might be entitled to claim.

Final thoughts on Do Foster Carers Pay Tax

We hope that this blog post has provided you with detailed information on the finances of foster parents, especially in relation to foster carer tax allowance, and that we’ve helped answer the question “Do Foster Carers Pay Tax”.

If you would like to discuss things in more detail, we are always at hand to talk to people who are interested in fostering. You can use the live chat feature on our website to talk directly with a member of our staff. Alternatively, you can get in touch with us by visiting our “Contact Us” page, or by phoning 0330 0948816.