When you are fostering and receive a foster carer payment, this means that the relevant income will be treated as “self employed”. You will receive your fostering payment without any tax deductions or National Insurance payments.
Foster carers will need to register as self employed with HMRC and complete a tax return each year. Or if you are already completing one and registered, include the relevant income in your return.
Foster carers receive a tax relief called Qualifying Care Relief
This is currently made up two parts:
- • £10,000 fixed amount for each household for a full tax year
- • Weekly amount for each cared for child or young person:
- – £200 for children under 11
- – £250 for children aged 11 or over
For the balance of fostering income above the Qualifying Care Relief, you are likely to pay tax and would need to include the taxable amount under the simplified or profit method.
Your fostering income is relevant for your potential benefits and please see guidance below. We recommend all foster carers take relevant advice on their tax and speak to the Department for Work and Pensions relating to benefits. We are here to help you but only in providing helpful information.
Please see the link below on the current Qualifying Care Relief as these have been reviewed in the Budget for 2023 and are expected to be increased.
Housing Benefit & Universal Credit
Your fostering pay (or ‘allowance’) is not likely to affect any housing tax benefits or Universal Credit if you are claiming one or both of them. It is disregarded when included your calculations, so depending on any other income streams, this could leave foster carers free to claim these two valuable benefits.
Carer’s Allowance & Disability Living Allowance
If you are already claiming either or both of these for your own child, then your fostering allowance should not affect these either.
Working Tax Credit & Child Tax Credit
You may be entitled to these if you also have children of your own, as foster carers count as being self-employed.
DLA (Disability Living Allowance)
Foster parents can make a claim for this on behalf of a foster child or young person in their care, that has a disability and is under the age of 16. Your local authority may help you arrange plans and budgets for the DLA award, including the possibility of providing financial help with any modifications you might need with your home.