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Do foster carers pay tax?

In a word – yes.

When you take that courageous, altruistic step and decide to become a foste r parent, chances are you've turned your back on a regular salary, along with the security and stability that brings.

Instead, as a professional foster carer, you are now required to register with HMRC as a self-employed person, opening up a whole new world of tax and benefit terminology and status.

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 to answer any questions and support you through the entire process. In addition, we have a wealth of concise and accurate resources that can help you navigate this new territory.

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 £10,000 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 tax trio

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 from your Local Authority or foster agency
  • 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 £10,000 per household per year, tax-free. You then receive an additional weekly allowance per child, variable by age.

Here's an example (figures are for England):

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

52 weeks x £200 (child under 11) = £10,400

52 weeks x £250 (child 11 and over) = £13,000

Plus £10,000

TOTAL FOSTERING TAX RELIEF = £33,400

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.

Family Fostering Partners - benefits and boons

Our 'Be There To Care' scheme is a boon for the new foster parent. It gives you up to ten weeks of guaranteed income while you make the transition from a salaried position, to the welcoming of your first foster child.

Additionally, 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.

Hopefully, this article answers your key questions on the finances of foster parenting, but if not, please use one of the links below to get in touch.

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