Foster Care and Taxes – Everything You Need to Know
One of the things that many people who are considering fostering find the most surprising is that they will be classed as self-employed. This means that they are responsible for paying their own taxes.
Thanks to modern technology, as the saying goes – taxes no longer have to be taxing! It’s simple to register online, and many carers find after the standard tax-exempt threshold, along with additional carer tax exemptions, they have very little to pay at the end of the year – if anything at all.
Understanding foster carer tax relief
All those registered as self-employed, currently enjoy a tax-free income up to £10,000. That means, if you earn £10,000 a year or lower, you will not need to pay any taxes. Foster carers also receive additional tax exemption thanks to the Qualifying Care Relief scheme.
How much relief you receive from the scheme will depend upon how many children you look after, how long you foster them, and their ages. As a general guideline, if you’re fostering children under the age of 11, you’ll typically be allowed £200 per week tax-free. Once a child reaches 11 years of age, the tax relief amount increases to £250 per week.
Registering and self-assessments
To register as self-employed, you just need to head over to the HMRC website. They provide detailed guides, advice, and a step-by-step guide, making it easy to register.
Once you’ve registered, in order to work out how much tax you will need to pay at the end of each year, you’re going to need to start keeping records of the children you foster. This includes dates you fostered them, how many children you fostered at any one time, and the ages of the children in your care.
The self-assessments themselves are also straightforward, but be aware that all self-assessments will need to be filed by January 31st each year. It is recommended you fill them out by November however, as that way, HMRC will calculate the tax for you based upon the information provided. If you file it on January 31st, you may be required to calculate your own tax.
Registering as self-employed also signs you up to pay Class 2 National Insurance. This is typically less than £3 per week.
The HMRC provide an eLearning course for foster carers which you can access on the HMRC website. You can take this in your own time and it’s 100% free. It aims to help you better understand taxes for foster carers, helping to make you more confident when it comes time to fill out your returns.
Overall, it may seem daunting being in charge of your own taxes, but it’s not as complex as you might think. HMRC has plenty of useful advice and we’ll always be on hand if you have any questions or concerns.
If you want more information on this, or want to talk to someone about becoming one of our valued foster carers request a callback today and speak to a member of our friendly team.