Foster carers support and benefits
While we understand that discussing finances can feel sensitive, talking openly about pay and allowances is crucial for ensuring you’re well-equipped to provide the best possible care for the children you’ll be supporting.
Tax and National Insurance
Do foster parents pay tax?
Thanks to generous tax relief from HMRC, you are highly unlikely to pay any tax on your fostering income.
The HMRC has a special scheme for foster parents which offers significant tax relief for looking after children. This scheme is called “Qualifying Care Relief” and means that in most cases, foster parents earn below the minimum earning threshold, and won’t have to pay any tax at all.
It’s worth noting, that as a foster parent, you will be classed as self-employed which means you will need to complete a tax return each year.
Don’t worry if this is all new to you, when you foster with FCA, you’ll receive free membership with FosterTalk which offers a range of services for our foster parents including an independent helpline, discounted insurance, financial advice, and discounted tax return service.
What is Qualifying Care Relief?
Qualifying Care Relief allows foster parents to receive payments to care for looked after children and young people up to their tax threshold without having to pay any tax. It is deducted from your overall income, including your fostering allowance.
Qualifying care relief compromises of two parts:
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- Annual tax allowance – you can receive £18,140 in fostering income, per year, before you have to pay any tax.
- Weekly relief – a weekly tax relief amount for each child in your care:
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- £375 per week for children under 11
- £450 per week for children aged 11 or over
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This tax relief is available for all types of foster care placements, including respite, short-term, long-term, and parent and child.
Factors that may affect how much tax you pay:
Although fostering allowances are generally tax-free, there are some factors which may affect the tax calculations, including:
- If you are caring for more than one foster child
- Whether you are paid an enhanced rate for complex, solo or parent and child placements
- If you share foster caring (and the fees) with another person as a partnership
- Whether you receive income from other sources – for example, from a part-time job or from rental properties
Working out how much tax you’ll pay as a foster parent:
Below are a couple of practical examples of how tax on foster parent allowance is calculated to give you an idea of what your tax-home income could be from fostering.
Example 1: Jennifer
Jennifer fosters two children (aged 5 and 11) on a long-term basis. She fosters full-time and doesn’t receive any other form of income.
- Jennifer’s total annual fostering allowance: £45,052
- Jennifer’s annual FCA fostering bonuses: £1,000
- Additional fostering expenses such as mileage allowance for travel to attend training and support groups: £1,000
Total fostering earnings: £47,052
- Annual tax relief: £18,140
- Weekly tax relief for 52 weeks at £375 (for children under 11) – £19,500
- Weekly tax relief for 52 weeks at £450 (for children over 11) – £23,400
Total in tax relief = £61,040
Jennifer earns £47,052 per year through fostering and is entitled to £61,040 in Qualifying Care Relief, therefore she does not pay any tax on her fostering pay.
Example 2: Cecelia
Cecelia fosters a young boy aged 12 for 32 weeks whilst also working as a teaching assistant.
- Cecelia’s total annual fostering allowance: £14,246.40
- Cecelia’s annual FCA fostering bonuses: £1,000
- Annual teaching assistant salary: £15,000
Total earnings each year: £30,246.40
- Annual tax relief: £18,140
- Weekly relief for 32 weeks at £450 (for child over 11) – £14,400
Total tax relief = £32,540
Cecelia earns £30,246.40 per year through fostering and her job, and is entitled to £32,540 in Qualifying Care Relief, therefore she does not pay any tax on her fostering pay.
Do foster parents have to pay National Insurance?
If your taxable income is less than your qualifying care relief amount, then your profits are deemed as NULL from fostering and you do not have to pay National Insurance. However, you may still decide to pay Class 2 National Insurance voluntarily to secure your entitlement to state benefits in case you need to claim them in future – this includes state retirement pension, employment and support allowance and maternity allowance.
Frequently asked questions
Will I be employed by FCA?
Foster care organisations do not employ foster parents, as the legal framework in the UK determines that foster families are self-employed. There is however a clear contract between FCA and our foster families, (Foster Parent Agreement) which outlines the responsibilities of both parties.
We make regular and generous payments, which are classed as income. For this reason, foster parents must register themselves as self-employed with HMRC.
Will I need to complete a self-assessment tax return each year?
Yes. For each year that you are an approved foster parent, you will need to complete a self-assessment tax return, even if your Qualifying Care Relief means that you do not pay any tax. At FCA, you’ll receive membership of Fostertalk – an independent service which also provides tax advice to foster parents.
Will I need to keep track of all the money I spend for tax purposes?
Normally, HMRC asks self-employed people to keep receipts to prove what they have spent in the course of their work. Foster carers are different. They don’t need to keep any records of everyday expenses such as household bills, clothing and food. The only exception is if they are caring for a child who has special or exceptional needs. You should keep your expenses for anything out of the ordinary.
Can foster parents still claim benefits?
As a foster parent you are entitled to claim for benefits, just like any other person in the UK. Also like everyone, the benefits you receive, and how much you are paid, depend on your personal circumstances.
If you already claim benefits, it is likely that you will be able to claim the same benefits exactly as before you started fostering. This is because you receive Qualifying Tax Relief on your income from fostering. The only time this might change is if your financial circumstances also change. For example, if you take on another job
Fostering and Claiming Benefits
What benefits can foster carers claim?
As a foster parent, you are entitled to claim benefits, just like any other person in the UK.
In most cases, the benefits you claim, and the amount you receive, will not change.
If you already claim benefits, you should still be able to claim the same benefits exactly as before you started fostering, providing your financial circumstances outside of fostering remain the same. For example, if you were receiving child tax credit before fostering, and all other circumstances remain the same, you’ll still be able to claim it once you’ve become a foster parent.
There are two basic types of benefits available:
- Contributory benefits
- Non-contributory benefits
Whether you receive these benefits will depend on your personal circumstances.
Contributory benefits:
As the name suggests, these are only available to people who have worked, and have therefore paid National Insurance contributions. These benefits include:
- Jobseeker’s Allowance (JSA)
- Employment Support Allowance (ESA)
- Retirement Pension, Widows Pension, and Maternity Benefits
Non-contributory benefits:
Unlike contributory benefits, you don’t need to have worked or paid National Insurance to qualify for these benefits. However, some of these are means-tested. In other words, how much benefit you receive – or whether you can claim these benefits – depends on your overall income and financial status. These benefits include:
- Carers Allowance (fostering income is disregarded)
- Income Support
- Working Tax Credit
- Child Tax Credit
- Jobseeker’s Allowance (income based)
- Housing and Council Tax Benefit
Discover how fostering will affect your finances
Don’t let finances be the barrier to starting your fostering journey, discover our essential guide to allowances, tax, National Insurance and claiming benefits whilst fostering.
Frequently asked questions:
How much do foster parents get paid?
Yes, fostering is a rewarding career which offers generous allowances. On average, you can earn up to £24,000 per year, tax-free. Head over to our finance calculator to get an idea about how much you could earn.
Do I pay tax on my fostering allowance?
Thanks to generous tax relief from HMRC, you are highly unlikely to pay any tax on your fostering income. This is because HMRC has a special scheme (known as Qualifying Care Relief) for foster parents for looking after children. Find out more. (link to tax page)
Do foster parents pay National Insurance?
If your taxable income is less than your qualifying care relief amount, then your profits are deemed as NULL from fostering and you do not have to pay National Insurance. However, you may still decide to pay Class 2 National Insurance voluntarily to secure your entitlement to state benefits in case you need to claim them in future – this includes state retirement pension, employment and support allowance and maternity allowance.
Can foster parents claim child benefit?
You can continue to claim child benefit for your own children and other children that live with you, however, you can’t claim for children that you are fostering. This is because you are already receiving a fostering allowance for each foster child or young person in your care.
Can I still claim housing benefit while fostering?
Housing benefit is means-tested, so if your household income is below the threshold (your fostering income should be disregarded), then you should still be able to claim for housing benefit.
Fostering Allowance
Your hard work deserves recognition, so once you start caring for a child, we’ll pay you a generous fostering allowance of £435 per week on average.
How much could you earn?
We provide a generous fostering allowance to all our foster parents at FCA. Try our finance calculator to see what you could receive.
Working whilst fostering
Everybody’s situation is unique, and we have many foster parents who work as well as foster, however, there are a few things to think about before applying.
Speak to our team
Whether you’re ready to start your journey or just want to chat to an expert, where here to talk.
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