Fostering tax records and relief
You are considered self-employed when you foster and need to register with HMRC.
For the children and youth placed with you, you will receive fostering payments, which are exempt from national insurance and income tax. As a result, you must file a tax return every year to report your fostering income.
You can claim a tax relief that includes £18,140 per household per year, plus a weekly amount based on the child or young person’s age. The weekly amount is as follows:
• Children under the age of eleven cost £375 each week.
• Children aged 11 and up: £450 per week
Only when a child or young person is actually placed with you are the weekly amounts eligible. Please see the HMRC website for further details:
https://www.gov.uk/support-for-foster-parents/tax-arrangements
Working example
You may be eligible for the following possible tax breaks if you care for an 8-year-old for 20 weeks of the year and a 15-year-old for the entire year:
A household’s overall tax exemption is £18,140 + 20 x £375 (child age 8) + 52 x £450 (child age 15) = £49,040.
The benefits of fostering
The fostering payments and allowances you receive are typically disregarded and not taken into consideration when benefits are being means tested and evaluated. Among the pertinent advantages are the following:
• Financial assistance
• DLA, or disability living allowance
• Credits for working taxes
• Allowances for job searching
We do advise you to disclose your fostering income, but it is better to disclose this information than not when you are applying for and talking about your benefits.