Thanks to generous tax relief from HM Revenue & Customs, our foster parents are highly unlikely to pay any tax on their fostering income.
By joining Fostering People, you will gain free membership to Foster Talk and their specialist fostering tax advice and support.
HMRC provides a fixed tax exemption called Qualifying Care Relief of up to £18,140 per year. This tax exemption is shared equally between all foster parents in the same household. This tax exemption means you won’t pay tax on the first £18,140 you earn from fostering.
Qualifying tax relief
You will also benefit from a weekly tax relief while you have a child placed in your care. This tax relief is on top of the £18,140 tax exemption and is for each child in your care.
The weekly amount of tax relief is dependent on the age of the foster child in your care:
For each child under the age of 11 in your care, you will benefit from a tax relief of £375 each week.
For each child aged 11 or over in your care, you will benefit from a tax relief of £450 each week.
We have included some examples for you on this page, however in very simple terms, if you foster with Fostering People, you won't pay any tax on your fostering income.
Susan fosters full time, she fosters a 15 year old girl, long term so has cared for her for a full year.
Tax relief £18,140
Tax exemption for 52 weeks at £250 £23,400
Susan's total fostering allowance £24,300
Total tax threshold for fostering £41,540
Susan receives a fostering allowance of £24,300 which is below the threshold, so Susan will not be eligible to pay tax.
Steve fosters 2 boys aged 12 and 15 years for a full tax year, but also fosters a 10 year old alongside for 42 weeks.
Tax relief £18,140
Tax exemption for 52 weeks at £450 x 2 £46,800
Tax exemption for 42 weeks at £375 £15,750
Steve's total fostering allowance £68,200
Total tax threshold for fostering £80,690
Steve receives a fostering allowance of £68,200 which is below the tax threshold, therefore Steve's fostering income is tax free.
Lisa is a foster parent for 3 teenagers. The eldest has disabilities and needs medical support for which Lisa receives an enhanced fostering allowance. Lisa has been caring for the young people for over a year.
Tax relief £18,140
Tax exemption for 52 weeks at £450 x 3 = £70,200
Lisa's total fostering allowance £96,930
Total tax threshold for fostering £88,340
Lisa's receives a fostering allowance of £96,930 which is £8,590 over the QCR threshold. However, because Lisa does not work outside of fostering her personal tax allowance can be used. The personal tax allowance means that Lisa can earn an additional £12,570 before paying tax, so Lisa's income is tax free. Although Lisa would need to pay Class 2 National Insurance Contributions.
Tax depends on your personal circumstances and other sources of income, but with expert tax advice from Foster Talk this will be simple for you. Foster Talk’s tax accountants can even manage your tax return on request for a small administration fee.
National Insurance Contributions (NICs)
Foster Parents at Fostering People are classed as self employed and as such must register to play Class 2 National Insurance Contributions. However Class 2 contributions are only payable if you make a profit from fostering. Profit is classed as anything you receive from fostering which is eligible for tax (Not covered by the Qualifying Care Relief). Because the QCR threshold is generous, it means foster parents at Fostering People are not likely to exceed this and therefore are eligible for National Insurance Credits, which count towards your state pension and other benefits covered by National Insurance.
How much could I receive as a foster parent?
Visit our financial calculator to see how much fostering allowance you could receive. This will give you a guide as to your annual income.
If you’re interested in becoming a foster parent and would like to learn more, then we’d love to hear from you.
Simply fill in the form below and one of our friendly team will be in touch.