The amount of tax that foster parents and shared lives carers pay is set to be reduced, thanks to the government’s proposal to increase tax relief.
Chancellor Jeremy Hunt has recently announced in the Spring Budget that tax relief rates will be increased from the 2023 to 2024 tax year, and will continue to rise each year in line with inflation. Being reviewed for the first time since the Qualifying Care Relief (QCR) was introduced in 2003, this is fantastic news for foster families, who are being recognised for the wonderful work they do in caring for the UK’s most vulnerable children.
The new proposal aims to support foster parents by helping them to retain most – if not all – of their fostering allowance, while ensuring this relief continues to increase with inflation. This will mean that thousands of families who are currently paying tax on their fostering income will either see a reduction in their tax bill or no longer be required to pay tax at all. Additionally, the new tax relief will enable foster parents to earn more in fostering payments, such as if they are caring for siblings, without paying tax.
Here is a breakdown of how the tax relief is being updated:
- Qualifying Care Relief fixed amount will rise from £10,000 to £18,140.
- The additional weekly tax relief per child will also increase –
- £200 to £375 per week (for under 11 year olds)
- £250 to £450 per week (for 11 year olds and over)
- QCR rates will now automatically increase each tax year.
As a direct result of the changes, fostering households should see an increase of around £30,000 on the amount of tax-free money they can receive from fostering, with an increase in annual income of over £3,500 when caring for two children over the age of 11.
Below is an example of how the tax relief will work for foster parents:
Diane is fostering two children aged over 11 years old.
- She receives £46,300.25 in fostering allowance payments.
- Her tax relief will now be £18,140 per year, plus a weekly tax relief of £450 per child.
- This means a total weekly tax relief of £46,800 for the year, and an annual tax relief of £64,940.
Diane will not be required to pay any tax on her fostering pay – where previously she would have been taxed on £10,466 of her earnings.
This update to the budget will be of huge benefit to foster parents, including:
- An easing of financial pressure during the current cost of living restraints.
- An increase in money to support with household budget and ensure they can provide for children in their care.
- Positive impact on those who are working and fostering, receive any additional income, or foster more than one child.
- Tax returns becoming more straightforward.
We hope that these positive and exciting changes will encourage a wider range of people to consider the rewarding role of fostering and come forward to help make a difference to children in need. If you’d like to know more about becoming a foster parent, please get in touch with our team today
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