Tax Benefits
HMRC has specific tax relief in place for foster carers. The tax relief scheme consists of three parts:
Your personal tax exempt allowance of £12,570 (2021/22);
An additional foster care tax exemption of £10,000 which is shared between foster carers living in the same household;
Additional tax relief for every week that a child is in your care:
£200 per week per child under the age of 11 years old
£250 per week per child aged 11 years old or over
Based on the tax relief schemes highlighted above Sally from example 3 above would have up to £35,570 of tax exemption per year assuming she had an 11 year old foster child placed with her for 52 weeks of the year.
Anyone who is self-employed must register to pay Class 2 National Insurance Contributions. If a foster carer has no taxable profit from their fostering, or if they have taxable profit (the amount over the threshold) by up to £6,365 (2019-2020) and £6,205 (2018-2019), they will automatically not have to pay Class 2 National Insurance Contributions.
It is important to remember that the tax exemptions above will depend on each individuals circumstances and should only be used as a guide. There are lots of factors that can affect your tax liability so we advise that you speak to HMRC. There is lots of additional information on the HMRC website including:
HMRC's help-sheet 236: A helpsheet explaining qualifying care relief, the tax scheme for foster carers
HMRC webinar for foster carers’ tax returns: A webinar explaining how to complete a tax return form
