The Fostering Network offers information and advice to its members about benefits.
As a foster carer you may be entitled to claim benefits and tax credits. The allowances and fee (if you get one) you receive from fostering are normally completely disregarded as income or only taxable profit from your fostering is taken into consideration for the purposes of calculating your entitlement to benefits.
Foster carers cannot claim Child Benefit for any fostered children who are placed with them. However, you can claim Child Benefit for your own children, or other children who live with you (who are not fostered). To find out more contact the Child Benefit Helpdesk: 0300 200 3100 or visit HMRC’s website.
Disability Living Allowance (DLA), Personal Independence Payment (PIP) and Carer’s Allowance (CA)
Disability Living Allowance (DLA) is a benefit paid to children and young people under 16 years who have care or mobility needs as a result of a disability or ill-health, and is paid on top of any other benefits, tax credits or income you may have. DLA is ending for people who were born after 8 April 1948 and are 16 or over and is being replaced by Personal Independence Payment (PIP). This is a similar benefit but is based on a different type of assessment. It is based on two components – daily living component and mobility component. Children getting DLA who reach 16 will be reassessed for either DLA or PIP depending on which part of the UK they live, although eventually all DLA claimants will be reassessed for PIP.
A fostered child under 16 can still claim DLA, and the award is paid to an adult carer (the ‘appointee’). If you think your fostered child might qualify for DLA you can contact the DWP on 0345 712 3456. DLA and PIP are both non means-tested, tax-free benefits, which you do not have to declare on your tax return. DLA can’t be back-dated and a DLA claim usually takes 40 days to process.
You can claim Carer’s Allowance (CA) if you care for someone who receives the middle or higher rate of the care component of DLA (or PIP - daily living component) or Attendance Allowance (a benefit for disabled people aged 65 or over). This could be an adult, your own child, or a fostered child, as long as you care for them 35 hours a week, and you earn under £110 net a week (foster payments are ignored as earnings). To claim CA, email email@example.com or phone 0800 7310297. Your income from fostering is disregarded for calculating CA, but CA is taxable, so you would need to declare it on your tax return.
Fostered children are not counted as part of your household when any means-tested benefits are calculated. Equally, the allowances and fees from fostering are not counted as income when calculating any of the following means-tested benefits: Income Support, income-based Jobseeker’s Allowance, income-based Employment and Support Allowance, Housing Benefit and Council Tax Support (these benefits as well as tax credits, and except for help with council tax, are being phased out between 2014 and 2018 and replaced by a new benefit called Universal Credit).
Many foster carers are in a unique position, as you can choose whether to be deemed as ‘working’, and claim Working Tax Credit, or ‘not working’ and claim Income Support (normally if you are a single foster carer).
Income Support (IS)
Income Support is a non-taxable benefit. You could get Income Support if you, and your partner if you have one, are not in full time employment (this is 16 or more hours per week for you and 24 or more hours for your partner). You must also fall into a category of people who do not have to look for work.
The DWP does not count fostering as work and fostering payments do not count as income for Income Support purposes. If you are fostering a child aged under 16, you can claim Income Support in the weeks that you have a child in placement (or if you don’t have a placement you can claim if you are caring for you own dependent child(ren) under five years, or a disabled child/young person).
In the weeks when you don’t have a child in placement, you can no longer claim Income Support (unless you can claim Income Support for another reason, for example if you are a single parent with a child under age five or you are getting carers allowance). The only option available to you would be to sign on as unemployed, and claim Jobseekers Allowance. However, this is problematic for foster carers because they have to demonstrate they are available for work and actively looking for work which is difficult when actually they are waiting for another placement. Any retainer payment you might get paid from your fostering service when you don’t have a child in placement may be treated as earnings and reduce your entitlement to Job Seekers Allowance.
You will not qualify for Income Support if you have savings of more than £16,000. Your entitlement to Income Support will be reduced if you (or any partner) have other employment and/or if you live with a partner who works more than 24 hours a week.
Mortgage lenders tend to look more favourably on Working Tax Credits than on Income Support, so if you have a mortgage, or are looking to get one, it might be worth considering claiming Working Tax Credit rather than Income Support. On the other hand, if you already have a mortgage, you may be able to get help with mortgage payments if you are on Income Support.
Most foster carers will be better off claiming Income Support than getting Working Tax Credits, but make sure you get expert advice, for example from the Citizen’s Advice Bureau, (see below) to ensure you make the right choice in your particular circumstances.
Council Tax Reduction
Council Tax Benefit was replaced with Council Tax Reduction (sometimes called Council Tax Support) in April 2013. Each local authority is required to have set out how they will support vulnerable groups with payment of Council Tax. Foster carers will need to contact their local authority to find out if and how they support foster carers with Council Tax. You could be eligible if you’re on a low income or claim benefits. Your bill could be reduced by up to 100%. You can apply if you own your home, rent, are unemployed or working. What you get depends on where you live - each council runs its own scheme, your circumstances (eg income, number of children, benefits, residency status), your household income - this includes savings, pensions and your partner’s income (check how they will treat your fostering payments), if your children live with you and if other adults live with you.
Council Tax Reduction does not apply in Northern Ireland, where a system of rates is in place.
Housing Benefit is for people who pay rent. You must have a low income and savings of less than £16,000 to qualify for this benefit.
The Government has put a cap on Housing Benefit, popularly known as ‘the bedroom tax’ or ‘spare room subsidy’ – meaning that entitlement to Housing Benefit (help with your rent) in social housing, as well as private rented accommodation, is reduced for under-occupancy. This would mean, in the social housing sector, that if you have a bedroom that is technically ‘empty’, your Housing Benefit would be reduced by 14% of your rent for one bedroom, or by 25% if two bedrooms are ’empty’. As foster children are not seen as members of your household, the rooms they use are therefore ‘empty’.
However, thanks to a campaign by The Fostering Network the Government agreed that foster carers are allowed one ‘spare’ bedroom, in both private and social sector housing – so if you have one room ‘spare’ for fostering, this should have no impact on your Housing Benefit.
Local Authorities also have power to make Discretionary Housing Payments (DHP) for which foster carers who have two or more ‘spare’ bedrooms should be given priority for additional help with housing costs. For more information see page 30 of the housing payments guidance manual. This says “Foster Carers are allowed one extra bedroom under the size criteria rules providing they have fostered a child or became an approved foster carer within the last 52 weeks. Some claimants may be caring for siblings, or for two or more unrelated foster children, and require additional bedrooms. National minimum standards for Fostering Services state that a foster child over the age of 3 should generally have their own room. However, the size criteria rules only allow foster carers to have one extra bedroom; therefore a DHP may be awarded to help cover any reduction in housing benefit due the additional rooms that are required”.
There are two types of Tax Credits – Working Tax Credit and Child Tax Credit.
As a foster carer on a low income you may be able to claim one or both depending on your circumstances. They are non-taxable.
Child Tax Credit
Child Tax Credit is paid to you if you are responsible for a child or young person who normally lives with you. Foster carers cannot claim Child Tax Credit for any fostered child they are caring for because they are provided with a fostering allowance which must cover the full cost of caring for each child placed with them. If a foster carer finds out they are getting Child Tax Credit for a foster child we would advise them to not spend the money, keep it to one side and alert HMRC.
Working Tax Credit
Working Tax Credit is to ‘top up’ the earnings of low paid workers and so is based on the hours you work and get paid for. HMRC regard fostering as ‘work’ (as foster carers are required to be registered as self-employed) so foster carers are eligible to claim Working Tax Credit.
The Government has introduced measures to strengthen the eligibility conditions for those claiming Working Tax Credit (WTC) on the basis of being self-employed by introducing a ‘genuine and effective’ test. The test would now be based on the principles of whether the self-employment was being carried out on a commercial basis with a view to realising a profit. Foster carers who opt to use the Qualifying Care Relief (tax scheme for foster carers, also known as the simplified method) to calculate how much tax they must pay will be considered to have met the new test, even if they do not make a taxable profit. However, foster carers who exceed the qualifying amount for tax relief and opt to use the profit/loss method may be asked to demonstrate that they are trading on a commercial basis with a view to making a profit.
When applying for Working Tax Credit or Child Tax Credit you need to disclose your profit from self-employment. This is the fostering income you receive in excess of your qualifying amount (tax threshold) of Qualifying Care Relief. If your fostering income is less than your qualifying amount you have no profit from fostering, and this is the amount (zero) you disclose as profits from fostering when claiming tax credits.
The level of tax credits you are entitled to will depend on any profit from fostering and, if you live with a partner, their earnings. Read more or contact the Tax Credits Helpline on 0345 300 3900.
Read more about tax and fostering income.
Universal Credit is part of the Government’s major welfare reform plans. Universal Credit is being phased in over a number of years and aims to simplify the current benefit and tax credits system. Universal Credit is a means-tested benefit for working age people who are on a low income. In time it will replace six existing benefits/tax credits with a single monthly payment. Universal Credit will eventually replace:
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Income Support
- Working Tax Credit
- Child Tax Credit
- Housing Benefit
At this time, your eligibility to claim Universal Credit depends on where you live and your personal circumstances. Universal Credit is being introduced gradually. Whether you can claim depends on where you live and your personal circumstances. If you don’t live in a qualifying area or you are not eligible to claim Universal Credit you may be able to claim other means tested benefits. You don’t need to do anything if you are already claiming existing benefits. You will be told by the Department of Work and Pensions (DWP) when you have to claim Universal Credit. Universal Credit applies to England, Wales and Scotland. It is not yet the law in Northern Ireland but may be introduced at a later date.
New claims to existing benefits, which Universal Credit is replacing, will then close down, with the vast majority of claimants moving onto Universal Credit during 2016 and 2017. If you are already receiving these benefits or tax credits, they will continue to be paid until you are moved onto Universal Credit.
Under Universal Credit the same disregard for both fostering fees and allowances will apply. Any fees or allowances you receive from fostering will have no effect on the amount of Universal Credit you are entitled to, and will not be treated as ‘earnings’ under Universal Credit.
The Fostering Network has secured a welcome eight-week concession for foster carers from having to sign on as available for work between placements. This means that if you are a foster carer receiving Universal Credit, it will continue to be paid, without you having to sign on and look for other work, for up to eight weeks if there is a gap between placements.
Universal Credit will be paid monthly rather than weekly or fortnightly; and it can only be claimed online, with telephone access in limited cases and face to face help to claim in exceptional circumstances. There are no paper based claim forms.
If you are a single foster carer of a child aged under 16 years, claiming Universal Credit, you will have to attend work-focused interviews (wfi’s) at the Job Centre until the fostered child in your care reaches 16. After that age, you can still get Universal Credit but will have to sign-on as looking for work. The wfi’s are designed to help people prepare for work, but it’s not like ‘signing on’ as unemployed.
A fostering couple who claim Universal Credit will have to nominate a lead carer to attend the work-focused interviews, and the other member of the couple will be expected to look for work, unless not able to work e.g. due to ill-health, where a fostered child needs two full-time carers, or if you have other caring responsibilities. Find out more about Universal Credit . In exceptional circumstances (e.g. where young people have special needs), it will be possible to be treated as fostering until the young person reaches 18, and for neither carers to have to look for work.
For more information about benefits you can go the Government's website or the charity Turn2us, or for expert benefits advice in your particular circumstances you can visit your local Citizens Advice Bureau.
The charity Turn2Us provides an online benefits calculator. You can upload information about your household and finances and find out which benefits you might be entitled to claim.
For more information and advice, contact our helplines.