Tax allowances in fostering
Are you wondering how much tax you’ll pay on your fostering allowance? Did you know that thanks to Qualifying Care Relief you’re unlikely to pay tax on what you receive from fostering.
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As a foster parent you will likely be exempt from paying tax on your fostering allowance due to special government tax relief known as Qualifying Care Relief (QCR). This tax relief applies to all the different types of foster care and is available to everyone who fosters.
As a foster parent, you will be considered self-employed and must therefore file a tax return each year and register yourself with the HMRC. You can do this by completing the online registration form or by calling the government’s self-employed helpline on 0300 200 3504.
For detailed guidance on how to complete your tax return, visit our guide to foster parent tax & self-assessment.
National Insurance for foster parents
Many foster parents are exempt from making National Insurance contributions, providing the money they make from fostering falls below the figure set out by current Qualifying Care Relief legislation. However, we recommend that our foster parents pay voluntary Class 2 National Insurance contributions.
These contributions are necessary to enjoy certain benefits, and deciding not to pay voluntary contributions may have a negative impact on your future. For example, you’ll need 35 qualifying years of National Insurance contributions in order to be entitled to a full new State Pension. Maternity and bereavement allowances in the workplace are also effected by how many National Insurance contributions you make.
For more information on the ins and outs of National Insurance contributions, check out our guide to National Insurance for foster parents.
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Interested in learning more about fostering and finances?
Finances should never be the barrier to fostering. Like any caring profession, it’s important to know you’ll be able to make a difference without having to worry about whether you can afford it.
Download our fostering finance guide for everything you need to know about foster care pay, tax, benefits and more!
Claiming benefits as a foster parent
You can still claim benefits while you are fostering. There are three different types of benefits:
Contributory benefits. These are exclusively for people who have paid the required amount of National Insurance contributions, either voluntarily or through their workplace. These include Jobseeker’s Allowance, new state pension and maternity allowance. The amount of National Insurance contributions required differs between benefits.
Means-tested benefits. These are non-contributory benefits, meaning they do not depend upon whether you’ve filled the National Insurance contributions quota, but on how much money you have. These include Carer’s Allowance and Child Tax Credit.
Other benefits. There are a select few benefits which are available regardless of your wealth or your National Insurance contributions. These include Disability Living Allowance (DLA) and Personal Independence Payments (PIP).
Everyone’s circumstances differ, so we’d always recommend that you speak with an advisor to get tailored guidance on your unique circumstances. For a more in-depth look at which benefits are available to foster parents, check out our article on how fostering effects benefits.
Interested in learning more about fostering and finances?
Try our allowance calculator to see how much money you could be entitled to when you become a foster parent. If you have any further questions about tax, National Insurance or benefits in fostering, reach out to a member of our team on 0800 369 8515, who’ll be happy to help.