Tax Arrangements for Foster Carers

Foster carers in England are treated as self-employed, meaning they must register with HMRC, submit annual tax returns and keep records of the children they care for. 

Foster carers benefit from a special tax scheme called Qualifying Care Relief, which significantly reduces the amount of tax you pay on fostering income.  You will find more detailed information by searching for ‘qualifying care relief HMRC’. [gov.uk]

Qualifying Care Relief is made up of two parts:

• A fixed annual tax exemption per household:
  £20,440 tax‑free each tax year. [gov.uk]
• A weekly tax relief amount per child, depending on age:
  • £435 per week for a child under 11
  • £515 per week for a child aged 11 or over [gov.uk]

Because of the combined household exemption and weekly child amounts, most foster carers do not pay tax on their fostering income.

How the Tax Relief Works

You do not pay tax on fostering income until your total fostering payments exceed:

• £20,440 + (weekly child allowance × number of weeks caring).
  Part‑weeks also count as full weeks. [gov.uk]

Example (from GOV.UK):

Laura is a foster carer for a 14-year-old for the whole of the year and for an 8-year-old for 10 weeks of the year. She gets:

• Tax exemption for the household = £20,440
• Tax relief on what she earns for fostering the 14-year-old (£515 × 52 weeks) = £26,780
• Tax relief on what she earns for fostering the 8-year-old (£435 × 10 weeks) = £4,350

Altogether, Laura does not need to pay tax on the first £51,570 she earns from fostering.

National Insurance

Foster carers may qualify for National Insurance credits, which help count towards their State Pension. [gov.uk]

Other Income

Fostering tax exemption only covers income from fostering. Carers still pay tax on earnings from other jobs or investments. [gov.uk]