Many people may find it daunting trying to understand the complexities around fostering and their tax and national insurance contributions. At The Fostering Network we have publications and helplines to help foster carers better understand what it means for them and their finances.
All foster carers are treated as self-employed for tax purposes. There is a specific tax scheme foster carers can use called qualifying care relief. The scheme calculates a generous tax threshold unique to the fostering household and when compared with their total fostering payments determines if a foster carer has to pay any tax from their fostering or not. For many foster carers their total fostering payments are below their tax threshold and they do not have to pay any tax.
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 £6,205 (2018-2019) and £6,205 (2017-2018), automatically they will not have to pay Class 2 National Insurance Contributions. The individual circumstances of the foster carer will determine if this is the best option for them or whether they have to make other arrangements to maintain their national insurance record, for example apply for national insurance credits or opt to pay the Class 2 contributions voluntarily.
Further information about tax and national insurance is available at:
- HMRC's e-learning package for foster carers
- HMRC's online forum for foster carers
- HMRC webinar for self-employed people: Usually every month HMRC hold a ‘webinar’ (a ‘live’ presentation you can watch and participate through your computer). More information and how to register can be found here (scroll down to ‘foster carers’)
- HMRC's help-sheet 236: A helpsheet explaining qualifying care relief, the tax scheme for foster carers. You can also go to the www.gov.uk and type HS236 in the search box.
HMRC webinar for foster carers’ tax returns: A webinar explaining how to complete a tax return form
If you would like to use a specialist tax service for foster carers, please find out about Williams Giles.
How we can help foster carers
Income Tax and National Insurance: Signposts in Fostering
How the qualifying care relief scheme for income tax works.
- How foster carers should calculate their tax threshold and complete a tax return if they need to.
- How fostering affects national insurance contributions.
What happens if a young person stays on after their 18th birthday.
You can purchase our Income Tax and National Insurance publication online.
This publication is available to our members at a discounted price.