Everything you need to know as a foster carer
Understanding how much tax you will pay as a foster carer can be confusing; that’s why we’ve put together a handy guide to help you manage your tax payments with useful resources and links to organisations who work specifically with foster carers to provide tax advice and support.
Plus, our friendly team at Bradford Fostering are always on hand to help!
What do foster carers earn?
On average, Bradford Fostering pays our foster carers £561 per week, equivalent to £2,043 per month. The actual amount you will earn depends on how many children you are caring for, their ages and other factors, such as your skills and experience. It will also depend if you are a full-time or a part-time foster carer.
We pay our foster carers an all-inclusive weekly amount (or daily amount if part-time). This payment is made up of two parts:
The Fostering Fee
This fee can vary based on your experience and skills level and the number of children you care for. As a new carer, you will typically start as a Level 1 carer. You will have the opportunity to work towards Level 2 status after a year of being approved, and you have completed the Training, Support & Development Standards for foster care and demonstrated your developing skills as a foster carer.
To become a Level 3 carer, you will need to have fostered for a few years, demonstrated ongoing learning and professional development and become involved with development opportunities in the wider fostering service. Your social worker will be able to advise you on how to meet these requirements.
The Fostering Allowance
This is a payment to cover the living costs associated with caring for a child, such as food, clothing, activities and increases in household bills. The amount of allowance you receive varies depending on how old the child is and you would receive an allowance for each child you care for. You may also receive financial subsidies to purchase essential equipment such as bedroom furniture, car seats etc., plus allowances for birthdays, summer holidays and religious holidays.
When you become a foster carer, you are classified by Her Majesty’s Revenues & Customs (HMRC) as self-employed for tax purposes, which means you will need to apply with HMRC for self-assessment as soon as you have been approved to become a foster carer.
Following this, you will need to fill out an annual self-employed tax return; this includes details of your fostering earnings and any other income you may have, so it’s vital to keep a note of anything you earn from fostering.
Don’t worry! The process is very straightforward, and you’ll have access to plenty of support and resources to make the process even easier.
Do foster carers pay tax?
Foster carers are allowed to use a tax scheme called ‘Qualifying Care Relief’; this scheme allows foster carers to receive payments up to a certain amount, which is decided by HMRC, from their fostering service without being liable to pay any tax.
You could be exempt from paying tax on all or most of your fostering earnings depending on:
How many children you look after
Whether or not it is a complete tax year
Whether or not there are other carers in your household
How do I know if I need to pay tax?
When you become a foster carer, you must submit a tax return at the end of each financial year. Your earnings will be unique and depend on how many children you foster and how old they are; you will need to work out your own individual tax threshold.
Firstly, every foster carer has a basic tax allowance of £10,000 per household per tax year, providing they’ve been approved for a full tax year. If other carers live within the same household, they will still only qualify for a joint allowance of £10,000.
You will also receive a tax allowance for each child you foster. These are:
£200 per week for a child under the age of 11
£250 per week for a child aged 11 and over
These figures are then added together to get your total tax threshold.
Next, you’ll need to find out how much you earned from fostering during the tax year. This should be straightforward, but we recommend keeping a note of any earnings you get from fostering allowances, retainer payments and any expenses.
Finally, you will need to work out your tax liability. This can be done by comparing your tax threshold to the total earnings you get from fostering. If your total earnings are less than your tax threshold, you have no income tax to pay. If your payments exceed your tax threshold, then you will need to pay tax on the amount above this.
Martha is a level 1 foster carer for a 9-year-old child for the whole year. She earns £296 per week, which gives her a total annual income of £15,392.
Her tax threshold equals £10,000 + 1 Child (52 x £200) £10,400 = £20,400
Martha’s fostering income does not exceed her unique tax threshold, which means she is not liable to pay tax on these earnings.
Will fostering affect my benefits?
As a foster carer, you can still claim for means-tested benefits depending on your circumstances, as your fostering allowance isn’t usually counted towards your total income when calculating your eligibility to receive them.
Where to find help
There are many businesses and charities who provide advice and support for foster carers to help you complete your tax return, including The Fostering Network
BIFCA (Bradford Independent Foster Carers Association) runs free twice-yearly tax workshops to help you fill in your self-assessment form if needed. Dates for these workshops will be sent out to you in our fostering e-newsletter.
The Fostering Network can also help you (as a member) with advice and support. The Fostering Network works with accountants William Giles for a tailor-made fixed fee tax return service. For more information, please visit The Fostering Network website.
You can also complete an eLearning course with HMRC that has been specifically developed to help foster carers manage their self-employed status, tax returns and National Insurance contributions. You can access the eLearning course here.
You may also find the following links helpful:
HMRC's online forum for foster carers
HMRC webinar for self-employed people
HMRC's help-sheet 236, which explains qualifying care relief in further detail
HMRC webinar for foster carers’ tax returns, which explains how to complete a tax return form
Want to learn more about fostering in Bradford?
Want to find out more about how much you could earn as a foster carer? Download our rates sheet today.