Foster Carers and HMRC

Fostering is classed as self-employment and carers need to register as self-employed.

HMRC take the view that even if you have no tax to pay, you must still register as self-employed.

Once registered you will be asked to complete a Tax Return yearly for the period 6 April to the next 5 April.

You will need to ensure that you submit your Tax return by 31 October (if you are filing by paper) of by 31 January (if you are filing online) following the end of the tax year in order to prevent late filing penalty charges. You will also need to make sure you pay any tax liability in time in order to prevent late payment penalties and interest charges.

Alexander Bursk Ltd is associated with the Manchester Foster Carers Association and act for a number of its members.

We offer a full and stress fee service from registration to submission ensuring that Returns are correctly completed, they are filed on time and all back up records are kept, making the whole process worry free.

There are many elements that can affect your tax liability:

  1. The number of placements you have
  2. The type of placement you have, for example you may receive an enhanced fee for one of your placements, and whether you incur additional expenses for a child with special needs.
  3. Whether you foster with your partner
  4. Whether you receive any other income as well as your fostering income.

HM Revenue and Customs have set up a tax scheme for foster carers to simplify the calculation of their taxable income by comparing a “Qualifying Amount” to their total fastening income.

The Qualifying Amount is made up of two elements:

  1. The first element is a fixed rate of £10,000
    • This amount is available to you if you have been a foster carer for the entire tax year
    • If you have been a foster carer for part of the tax year, the amount is calculated on a pro-rata basis from the date you were appointed in the year
  2. The second is a weekly rate of:
    • £200 per week per placement under the age of 11
    • £250 per week per placement aged 11 or over

If your placement’s 11th birthday falls in the tax year, the rate changes from £200 to £250 per week from the week of the birthday.

In order to qualify for this tax relief you will need to group together the total income you received from your fostering duties, including reimbursed mileage and/or expenses along with your fostering income.

If your total fostering income is less than your “Qualifying Amount” then your taxable income is deemed to be NIL and therefore you have no additional tax to pay. If your income is over the Qualifying Amount, the excess is treated as your profit (taxable income) and this might give rise to an additional tax liability.

I you have any fostering income in excess of your Qualifying Amount, you also have your personal allowance to use (providing this has not been used against other income e.g. employment income).