TAX FOR FOSTER CARERS

Foster Carers are classed as self-employed which means you must register as self-employed with HMRC and file tax returns.

Foster Carers are also entitled to qualifying care relief which means you will earn £12,570 (per household) from fostering before you have to pay tax. You also get tax relief for every week you foster a child.
HMRC has special rules for foster carers to simplify the calculation of their profit, by comparing a ‘Qualifying Amount’ to their total fostering income.

Total fostering income is the total income received by the carer from their fostering agency, which includes reimbursable expenses, holiday money, birthday money and allowances.

The Qualifying Amount is the total of the following elements:
• The first element is an annual fixed rate of £18,140, which has to be apportioned if you were approved part way through the tax year.
• The second element is a weekly rate of:
• £375 per week per placement under the age of 11
• £450 per week per placement over the age of 11
If your total fostering income is less than your ‘Qualifying Amount’ then your profit is deemed as £NIL. If your total fostering income exceeds the qualifying amount, the excess is your taxable profit from fostering.

It’s important for Foster Carers to pay National Insurance contributions. These contributions allow you to receive state benefits and a state pension at retirement age.
There are different classes of National Insurance:

Class 1 – paid if you are an employee (deducted from your pay on your payslip.)
Class 2 – paid by the self-employed and collected via the self–assessment system.
Class 3 – voluntary contributions paid to make up gaps in your contribution record – these are more expensive than Class 2 contributions (2020/21 Class 2 per week £3.05. Class 3 per week £15.30 per week.)
Class 4 – paid by self-employed people with high profits (over £9,500 in 2020/21)

State benefits can provide vital support for fostering families. Benefits for Foster Carers can include Income Support or Working Tax credit (legacy benefits) or Universal Credit. All new benefit claimants will be offered Universal credit which is a means-tested benefit paid to low-income households to support their income.

You may also be able to claim:
• Disability benefits for your foster child if they meet the criteria
• Carers Allowance (if your foster child gets disability living allowance or personal independence payment)
• Council Tax relief

To book a place on one of our free tax sessions with BK Plus, please complete the form below. We will email the link to the attendee in the week before the event.

Places are limited, so please do not book unless you are certain of attendance.