Do foster carers pay tax?
One question we are frequently asked is whether or not foster carers are required to pay tax on their carer payments.
It is helpful for all of us to understand our financial position for budgeting, household costs and planning. It is good to know what our available money is after any tax is deducted from our income. This is the same for fostering and there is a good tax relief available to offset against fostering income. This can often cover your total fostering income in full meaning that actual tax may not be payable. It does however depend on your personal tax position and total fostering payments received.
The income for fostering is received through the foster carer payment that you receive from your fostering agency or local authority. This is paid based on the number of children placed with you and their overall needs.
The foster carer payment is taxable income and when you become a foster carer, you should take the important step of being registered as self employed. Your other income from any other employment or self employment would be taxed also as normal. Your fostering income does not change the tax status of other income.
You would file a tax return for each tax year covering your taxable income including fostering.
Tax exemption for fostering
For each tax year, you do have a household tax exemption of £18,140 in total to cover your fostering income. Then in addition to this, there is a weekly amount per child or young person depending on their age. The levels are below:
- Age under 11 or under – £375 per child or young person
- Age 11 or above – £450 per child or young person
These amounts only apply when you have the child or young person in placement with you. These amounts and the overall tax exemption is referred to as “qualifying care relief”.
Depending on your foster carer payment levels and placements during the tax year, your total taxable from fostering maybe covered by the tax exemption in full. It is a good approach to compare your total foster carer payment to the tax exemption. If you expect to pay tax on your fostering income, then you may wish to set aside money or savings to cover this if possible.
The total household fostering allowance of £18,140 each year is £348.84 on a weekly basis. This is taking the figure across the full 52 weeks of the year, if you should have fostering placements with you all throughout the year. If for example, you had a young person aged 12 for the full tax year, your foster carer payment could be £798 per week before you paid tax. This is taking the £450 weekly relief and adding £348 from the household allowance.
It is important to note the figures are per household and not per individual. If you are therefore joint foster carers, you do not receive twice the amounts per above but the tax relief available is shared between you.
We recommend you take relevant tax advice and ask for further guidance from an accountant or tax advisor. The above content is for information only and not shared or intended to represent any tax advice.
If you’re interested in fostering with us, click the link below and request a call back from a member of our recruitment team!