Generous tax breaks for foster carers
Foster carers qualify for generous tax benefits for the work they do. Most foster carers do not pay tax on their fostering earnings.
As a foster carer, you could be exempt from paying tax on all or most of your fostering earnings, depending on how many children you look after, whether or not it is a complete tax year, whether or not there are other carers in your household.
"You may also be eligible for means-tested benefits, as your fostering allowance is not usually counted towards your total income when calculating your eligibility. "
- Justine, Fostering Manager
How do I know if I need to pay tax?
When you become a foster carer, you must submit a tax return at the end of each financial year. Your earnings will be unique depending on how many children you foster and how old they are; you will need to work out your own individual tax threshold.
Firstly, every foster carer has a basic tax allowance of £10,000 per household per tax year, providing they’ve been approved for a full tax year. If other carers live within the same household, they will still only qualify for a joint allowance of £10,000.
You will also receive a tax allowance for each child you foster. These are:
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£200 per week for a child under the age of 11.
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£250 per week for a child aged 11 and over.
These figures are then added together to get your total tax threshold.
It is important to remember that the tax exemptions above will depend on each individuals circumstances and should only be used as a guide. There are lots of factors that can affect your tax liability so we advise that you speak to HMRC. There is lots of additional information on the HMRC website including:
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HMRC's help-sheet 236: A help sheet explaining qualifying care relief, the tax scheme for foster carers.
- A webinar explaining how to complete a tax return form.
“Everybody - every child - should grow up having unconditional love from an adult. I think that’s what fostering is about - it’s about what’s right and what you can do right for that child”
Michelle, foster carer
How much could I earn as a Fostering Rotherham carer?
Sally & Theo
Sally is a Skill Level 3 foster carer with one foster child, Theo aged 11. Sally receives:
Foster Carer Fee = £197 per week.
Basic Allowance = £199 per week.
Total £396 per week / £1,584 per month*
Based on the tax relief schemes above, Sally would have over £30,000 of tax exemption per year, assuming she looked after Theo for 52 weeks of the year.
Anyone who is self-employed must register to pay Class 2 National Insurance Contributions. If a foster carer has no taxable profit from their fostering, or if they have taxable profit (the amount over the threshold) by up to £6,515 (2021-2022) and £6,475 (2020-2021), they will automatically not have to pay Class 2 National Insurance Contributions.
It is important to remember that the tax exemptions you will receive will depend on each individuals circumstance and these illustrations should only be used as a guide.