When you become a foster carer, you receive a fostering allowance for each child placed in your care. The amount of money you receive will differ, depending on the age of the child and the number of children in your care, along with any individual needs they may have. This financial support is classed as an income and therefore could be taxed.
Foster carers are classed as self-employed, so you’re responsible for paying your own taxes (as opposed to an employer paying them to HRMC on an employee’s behalf).
There is a very generous allowances for foster carers, so depending on how much you earn, you may not need to pay any taxes at the end of the year.
Foster carers must register as self-employed
Registering as a self-employed foster carer is simple and straightforward. The HMRC website makes it easy to register online. Carers are advised to take advantage of the Qualifying Care Relief scheme, which is specifically designed for foster carers. This offers additional tax relief, meaning you may end up paying very little taxes at the end of the year.
Once you’ve registered, you will need to start keeping records. Each time you foster a child you will need to keep a record of their age and the exact dates you looked after them, along with any extra payments and details you may need.
Foster care self-employed tax self-assessments
When you’re self-employed, you are responsible for paying your own taxes. This means you’ll be required to fill out a self-assessment tax return form each year. The purpose of this form is to calculate your earnings over the previous year and the amount of tax you owe or if you are due a refund. The deadlines for completing and returning this form are:
- 31st October for paper submissions
- 31st January for online submissions
See the HMRC deadlines page for more details. Completing the form usually takes around half an hour to complete.
Tax relief for foster carers
Foster carers receive additional tax relief for weekly fostering allowances.
Currently, everyone who is registered as self-employed can earn up to £10,000 without being taxed. Through the Qualifying Care Relief scheme, this tax-free threshold can increase significantly.
The amount of tax relief you receive will depend upon the number of children fostered during the tax year, their ages and the length of the placements. Typically, if you foster a child under the age of 11, up to £200 per week is tax-free income; for children over 11, £250 per week is tax-free. Please check how your tax relief is calculated and other details on the HMRC website. As a carer with the National Fostering Group, you can always get in touch with your local team to ask questions.
For more information
We have a full finance section dedicated to everything you need to know about being a self-employed foster carer, including detailed instructions on how to register. If you want someone to talk you through it and answer any questions you have, we’re more than happy to help – get in touch today.