Fostering tax allowance

Do foster parents pay tax?

Foster parents are usually exempt from paying tax on their income from fostering due to a specialist tax rule known as ‘qualifying care relief’.

From the moment you start caring for a child, you’ll receive £19,690 annual tax relief allowance, plus an additional weekly allowance for each child in your care. The amount of weekly foster care relief that you receive depends on the age of the child you are caring for.

Since the government increased the tax relief rate for foster carers, foster families will generally be able to keep the majority – if not all – of their fostering allowance payments.

How does foster care tax relief work?

Foster parents are classed as self-employed and will need to complete a tax return each year. However, many will either pay very little or no tax at all on their fostering income thanks to qualifying care relief.

The qualifying care relief comprises of two parts:

Annual tax allowance – you can receive £19,690 in fostering income, per year, before you have to pay any tax.
Weekly relief – a weekly tax relief amount for each child in your care:
- £415 per week for children under 11
- £495 per week for children aged 11 or over

Step 1: Work out your total income from fostering

Work out the annual income that you receive from fostering. This should include your fostering allowance, as well as any additional payments you have received, such as holiday payments, mileage claims, respite payments and more.

Examples:

Jodie cares for 1 child (aged 7): £443.80 x 52 = £23,077.60

Raifa cares for 2 children (aged 11 and 14): £926.56 x 52 = £48,181.22

Step 2: Calculate your total foster care tax relief

Every fostering household receives £18,140 of tax relief each year, plus a set weekly amount depending on the age of the children in your care – see amounts here.

Examples:

Jodie cares for 1 child (aged 7) and will receive £41,270 in tax relief: £19,690 + (£415 x 52)

Raifa cares for 2 children (aged 11 and 14) and will receive £71,170 in tax relief: £19,690 + ((£495 x 52) + (£495 X 52))

Step 3: Find out how much tax you will pay

The final step is to subtract your fostering tax relief (step 2) from your total income from fostering (step 1).

Taxable income = fostering income – tax relief

Examples:

Jodie cares for 1 child (aged 7) and receives £23,077.60 per year. Her total tax relief is £41,270 and so she will pay no tax.

Raifa cares for 2 children (aged 11 and 14) and receives £48,181.22 per year. Her total annual tax relief is £71,170 and so she will pay no tax.

Working out how much tax you’ll pay as a foster parent…

Things you may need to consider…

While foster parents pay little or no tax at all, there are some things that may affect this:

The number of children you have in placement
Whether you’re paid enhanced fees for the children in your care
Whether you operate as a partnership for tax purposes
Whether you receive any other income – e.g. part-time job

You may be interested in…

Allowance calculator

As a foster parent, you’ll receive a generous allowance and other benefits. Find out how much you could receive fostering with Fosterplus.

Find out more

National Insurance

Generally, most foster parents don’t have to pay National Insurance. However, you may decide to pay voluntary contributions so you can receive state benefits in future.

Find out more

Claiming benefits

Becoming a foster parent shouldn’t affect the benefits you’re able to receive. That’s because your income from fostering isn’t counted towards your total income when calculating eligibility.

Find out more

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