Making Tax Digital

Last May, HMRC announced that they would be rolling out ‘Making Tax Digital’ for self-employed people from 2024 and were planning to include foster carers. We campaigned on this due to our concerns around the additional costs and burdens this would have placed on foster carers and fostering services. 

We are delighted that foster carers will now be exempt from Making Tax Digital (MTD) following our campaign with our tax partners Williams Giles Xeinadin Group.

About the campaign

The Fostering Network met with HMRC in May 2023 who explained their thinking to include foster carers in Making Tax Digital (MTD) from 2024. This would have meant that foster carers would need to submit quarterly online returns, as well as annual returns, using HMRC compatible software, which is estimated to cost around £100 per year. We had concerns regarding the additional burden this would place on foster carers and fostering services.

Following the meeting we surveyed foster carers and services about their views on including foster carers in MTD. The responses made overwhelmingly clear the emotional, financial and administrative burden MTD would have, and the impact on the recruitment and retention of foster carers. 

We then used this evidence to build a case to present to HMRC in September about why we think foster carers should be excluded from MTD. 

To keep the pressure on while a decision is being made, we wrote to ministers and the Treasury to highlight the negative impact of MTD on foster carers. We also asked our supporters to write to their elected representatives.

Thank you to everyone who supported our campaign!

To find out more about MTD see our webpage. To find out more about the decision to exclude foster carers visit the Government website.

Why should foster carers be excluded? 

The recruitment and retention crisis in fostering

There is currently a crisis in fostering and The Fostering Network estimate that across the UK, a further 9,265 foster families are needed in the next 12 months alone, in order to ensure all fostered children can live with the right family for them.

We know that without enough foster families, some children will find themselves living a long way from family, school, and friends, being placed in children’s homes, split up from brothers and sisters and becoming increasingly reliant on poor fit foster care matches who do not have the ideal skills and experience to meet their specific needs. This means children in care are not able to reach their full potential with a foster family that truly suits their needs.

This has been highlighted in the Independent Review of Children's Social Care in England, as well as being a focus in Wales, in The Promise in Scotland and Independent Review of Children's Services in Northern Ireland. 

Administrative burden on foster carers

We surveyed over 1,000 foster carers, fostering services and social workers and asked if they or their fostering services are set up to report quarterly. As you can see from the  graph, 80 per cent of those that responded said no.

Graph, are you currently set up to report quarterly? 80 per cent no, 5 per cent yes, 15 per cent don't know

Many foster carers explained that they have to chase their services for yearly breakdowns to report, as well as many not having online systems and still using paper copies. Fostering services also explained that many services are stretched already and this would create an onerous burden on foster carers who already have to deal with a large amount of reporting and paperwork for the children in their care.

This will be particularly difficult for respite carers, emergency carers and Mockingbird hub carers who will all see their administrative burden increase hugely due to the number of young people they care for during the year. It will be extremely difficult to keep a detailed record of the days these young people came and left their care and their ages rather than just wait for one end of year annual summary of their caring activities.  

The role of a Foster Carer is a 24/7 commitment, and they are caring for children continuously. They do not have a separate work and home life so they will need to find additional time to deal with this increased reporting. Many foster carers emphasised that this time will either have to come out of the time spent with the children or their self-care. As one foster carer explained:

'We have enough to do already. Regular logs, meetings and training. It's just more work that we do are not getting paid for. I care for a child with complex needs and work 24/7. More work such as this just adds the stress of an already poorly paid stressful job! The country is crying our for foster carers and this is just going to make more leave.'

Technology and costs

HMRC are currently not considering an online system to enable foster carers to complete the quarterly reports under MTD for free in the same way that they currently do for annual self-assessment. If this is the case, foster carers will be expected to purchase expensive software packages.

Subscribing to accounting software could cost approximately £100 per year. An extra £100 for each 56,000 fostering households in the UK equates to £5.6 million a year which could have been spent on children in care.

We know from our State of the Nation 2021 survey that over a third of foster carers in the UK said that their allowances do not currently meet the full cost of looking after a child. Putting an additional financial pressure on foster carers will have a huge impact, especially during the increase to the cost of living.

Overall impact

MTD’s aim is to make tax easier, but we know that this will not make tax easier for foster carers. It will also provide distorted figures quarterly, due to the nature of fostering, therefore not achieving real time up to date data hoped for by HMRC.

We strongly believe that foster carers should be excluded from MTD. In the survey foster carers were given the opportunity to leave comments and worryingly, 15 per cent of foster carers said that they would consider stopping fostering if MTD came into effect.

As this foster carer sums up:

'Why should we be burdened with both this financial cost and time onerous form filling when our time would be far better spent doing what we do best - looking after the country's most vulnerable children.'