Jeremy Hunt's Budget delivers welcome news for foster parents
What is Qualifying Care Relief (QCR) and what does the Spring Budget mean for foster parents? How much more can foster carers earn before being eligible for tax?
We are always hopeful that the budget gives us some good news, but this March the Chancellors budget was great news for foster parents and at Fostering People we were delighted as we heard that all Foster Carers could now benefit from increase in the Qualifying Care Relief (QCR).
There has been a lot of coverage since the start of the cost of living crisis, detailing the impact this is having for foster carers and how some have had no choice but to stop fostering altogether.
Within Fostering People, we haven’t experienced this directly and have done all we can to help our foster parents with three cost of living rises in our fostering allowance over the course of a year; but we know first-hand how welcome it will be for our foster parents to keep more of their allowance before being eligible for tax.
With the squeeze on household finances covering all those aspect so integral to fostering such as increased energy, food and clothing prices, this increase will really help foster carers cover the day to day costs of caring for children.
What is a Qualifying Care Relief (QCR)?
Foster Care Relief was introduced in 2003 and apart from a slight change and extension to Qualifying Care Relief to include adult care in 2010, it has remained largely unchanged in its 20 year history. The QCR is an additional tax allowance, to the personal income tax allowance which is currently £12,570.
The relief is made up of two parts a fixed relief which covers the whole tax year and a weekly amount which can be claimed additionally for each week, per child.
What does the changes in Qualifying Care Relief (QCR) mean for foster carers?
Since the QCR was introduced it has remained at the same level of £10,000 for the fixed rate and the weekly rate at £200 per week for children under 11 years and £250 for 11 years plus.
But the announcement in this March’s budget sees an 81% increase to £18,140 in the fixed rate and an 87% increase in the weekly amount to £375 for children under 11 years and £450 for 11 years plus.
So which foster carers will now pay tax and who will be exempt altogether?
This does depend on how much your fostering allowance is and how many children you foster. But in simple terms it means that nearly all full time foster carers that don’t work alongside fostering will not exceed the tax threshold and therefore are unlikely to have to pay any income tax at all.
Below we have some examples which shows what the budget change means. These illustrate the tax reliefs available and NOT actual fostering incomes.
Susan fosters full time, she fosters two siblings aged 10 and 15 long term, so has cared for them both for a full year.
Fixed QRC Relief - £18,140
Weekly tax relief for 15 year old - £23,400
Weekly tax relief for 10 year old - £19,500
Total tax threshold for fostering £61,040
The previous threshold was £33,400. This means Susan’s tax threshold has increase by £27,640. The tax that would have been paid on £27,640 at 20% would have been £5,528.
Steve fosters 3 boys aged 11, 13 and 15 years, he has cared for them for a full tax year.
Fixed QRC Relief - £18,140
Weekly tax relief for all three boys over the age of 11. £70,200
Total tax threshold for fostering £88,340
The previous threshold was £49,000. This means Steve’s tax threshold has increased by £39,340. The tax that would have been paid on £39,340 would have been £7,868.
These example show that the generous allowance announced by the chancellor will make a significant difference to the income of hard working foster parents and we hope will alleviate some of the financial concerns people may have when considering the opening their hearts and their homes to vulnerable children in desperate need of safe and caring home.
Tax can often be a little daunting, but at Fostering People our foster parents are members of Foster Talk which provides access to specialist fostering accountant to provide help and support in this area.
Find out how much you could receive as a foster parent with Fostering People.