Tax records and relief

When fostering, you are classed as self-employed and should register with HMRC.

You will receive fostering payments (for the children and young persons that are placed with you) and these will be free of income tax and national insurance. You therefore will need to complete a tax return each year to cover your fostering income.

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Fostering tax relief

You are entitled to claim a tax relief that includes an annual amount of £18,140 per household, and then a weekly amount dependent on the age of the child or young person, which is as follows:

• Age under 11 - £375 per week (per child)

• Age over 11 - £450 per week (per child)

The weekly amounts are only eligible when you have a child or young person actually placed with you. Please see the HMRC website for further details:

The amounts have been increased to help support foster carers and reduce the overall tax payable. This is to recognise the hard work and dedication that you provide through fostering.

Working example

If you look after a young person aged 8 for 20 weeks of the year, and a young person aged 15 for the full year, you would be entitled to the following potential tax relief:

Tax exemption = £18,140 (household total) + 20 x £375 (child age 8) + 52 x £450 (child age 15) = £49,040

Fostering benefits

When benefits are being means tested and assessed, the fostering payments and allowances that you receive are generally ignored and not taken into account. The relevant benefits include the following:

• Income support

• Disability living allowance (DLA)

• Working tax credits

• Job seeking allowances

We recommend that you do share information on your fostering income, however when you are applying and discussing your benefits, it is better to share this information than not.

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Housing benefit

This benefit may help towards your costs of your rent (the benefit is not payable if you own the property you live at or you rent another property out). You can contact your local council and learn about claiming relevant housing benefit relating to the children that are being cared for at your home.

If you don’t have a placement for an extended period but the room is reserved for fostering, you may also be able to claim for that period (up to 52 weeks)

Council tax

You may be eligible to reduce your Council Tax bill by up to the level of 100%. This is dependent on your personal circumstances, persons living at your home and other financial considerations. For each Local Council, they have their own application of their approach and any relief. It is best to contact them to discuss your position.

For more information, speak to our team at Beacon Fostering today