What financial records should foster carers keep?

Financial records for foster carers are the documents and notes that show what fostering income was received, what it related to, and how it was treated for tax and household budgeting purposes. A complete system should cover fostering activity as well as any other income or self-employed work, so that your tax position can be assessed accurately.

Records of fostering income

• Keep remittance statements, payment summaries and annual statements issued by your fostering service.
• Record the date and amount of each payment, including any separate payment for specialist support, activities, transport or approved purchases.
• Note whether a payment relates to a standard allowance, an additional fee, an adjustment, an overpayment or a repayment.
• Keep copies of your fostering agreement and any written information explaining how payments are calculated. These documents can help explain unusual amounts when you review your records later.

It is sensible to compare your own record with your bank statements. Mark each payment as checked and investigate differences rather than changing figures to make the totals agree. A bank statement is useful supporting evidence, but it may not explain what an individual payment was for, so retain the related payment documentation as well.

Records of allowable fostering expenditure

Keep evidence for costs that you believe are connected with providing foster care. This may include household items bought specifically for a child, agreed activities, travel-related costs, professional fees and other purchases accepted under your fostering service’s procedures. For each item, note its purpose and whether it was for one placement, shared between placements or used by the wider household.

Where a cost is partly personal and partly connected with fostering, record the method used to divide it. For example, a shared household cost may need a reasonable apportionment rather than being treated as wholly related to fostering. Ask your fostering service or a tax adviser if you are unsure whether a particular cost is allowable; keeping a receipt does not automatically make an expense deductible.

Placement and payment information

Keep a simple placement summary showing the relevant start and end information, the type of placement and any changes that affected payments. You do not need to keep unnecessary sensitive details about a child in a financial file. Use an identification reference where possible and store any document containing personal information securely.

This summary can help you match payments to the correct period, particularly where a placement begins or ends part-way through a month, there is a planned break, or the payment changes after a review. Keep written confirmation of agreed changes, corrections and returned funds with the related financial entry.

Banking and household records

• Retain bank statements for the account used to receive fostering payments or pay fostering-related costs.
• Keep records of transfers between personal and household accounts so that the same payment is not counted twice.
• Record cash transactions at the time they occur, with a brief explanation and supporting evidence where available.
• Keep records of larger purchases, repairs or adaptations separately, including who approved them and whether any contribution was received.
• Retain records of refunds, reimbursements and amounts paid directly by the fostering service.

If you use an accountant or tax adviser, keep copies of the information supplied to them and the calculations or returns they prepare. You remain responsible for checking that the information submitted on your behalf is complete and correct.

Tax-related information

Foster carers are generally treated as self-employed for tax purposes, although the detailed position depends on their circumstances. HMRC’s qualifying care relief rules can provide a specific method for working out the taxable profit from foster care. The calculation can involve the total qualifying income received and the number and circumstances of children cared for, so records need to be clear enough to support the figures used.

Keep details of any other taxable income, pension contributions, self-employed work or benefits that may be relevant to your tax return. Fostering payments should not be assessed in isolation if you have other financial activities. If you are uncertain whether you need to register for Self Assessment or how qualifying care relief applies, obtain advice from HMRC or a suitably qualified tax adviser.

A practical way to manage the records

• Choose one spreadsheet, ledger or secure record-keeping system and use it consistently.
• Create separate categories for fostering income, approved costs, personal costs, reimbursements and other income.
• Enter information regularly rather than relying on memory at the end of the tax year.
• Reconcile the entries against payment statements and bank statements.
• Save digital documents in clearly named folders and keep paper documents together by tax year.
• Back up digital records and restrict access to documents containing financial or personal information.
• Keep everything for the period required for your tax and other legal obligations, and check the current HMRC guidance because retention requirements can depend on your circumstances.

A monthly review can identify missing evidence, unexplained payment differences or costs that need clarification before records become difficult to reconstruct. It also gives you a clearer view of how fostering affects your household budget without confusing fostering finances with general spending.