How does fostering allowance affect Universal Credit?

The key distinction is between payments made for fostering and ordinary earnings. Fostering payments are normally treated as disregarded income in a Universal Credit assessment, so they are not usually deducted from your award in the way wages or other earnings may be. This does not mean that every payment connected with fostering is automatically disregarded, so the type and source of each payment matters.

What counts as fostering allowance? Payments intended to meet the costs of caring for a foster child, together with any fostering fee included within the fostering payment, are generally considered under the special rules for foster carers. The payment may come from a local authority or an independent fostering agency. DWP may ask for a breakdown, particularly where an arrangement includes different types of payment.

Fostering allowance is designed to contribute towards the child’s day-to-day care and related costs. It should not be confused with:

• wages from a job with the fostering agency or another employer;
• self-employed income from a separate business;
• benefits or payments made in your own right; or
• other household income, such as a partner’s earnings.

Those other forms of income may be taken into account under the normal Universal Credit rules. For example, if a fostering organisation employs you and pays you through payroll, the employment income may need to be reported as earnings even if your role involves supporting foster children. The fact that you are also a foster carer does not automatically make employment income a fostering allowance.

How the assessment works

Universal Credit is assessed on the circumstances of your household. Although fostering payments are generally disregarded, your award can still change because of other factors, including your or your partner’s earnings, self-employed income, savings and investments, housing circumstances, children who are your dependants, and changes to your living arrangements. A change in your Universal Credit award is therefore not necessarily caused by the fostering allowance.

Foster children are not usually treated in the same way as birth, adopted or otherwise legally dependent children for the child-related parts of Universal Credit. The fostering allowance is intended to cover the costs associated with caring for them. You should give DWP accurate information about who lives in your household, but do not assume that a foster child can be added to your Universal Credit claim as a dependant.

What you should report

Tell DWP that you have started fostering and provide the information requested about your fostering arrangement and payments. This can normally be done through your Universal Credit online account, using your journal or the relevant change-of-circumstances section. If you are making a new claim, disclose the fostering arrangement during the claim process rather than waiting for DWP to ask.

Keep documents that show:

• the name of the local authority or fostering agency making the payment;
• the date and amount of each payment;
• whether the payment is maintenance, a fostering fee, a specific allowance or another type of income; and
• any separate payslips or invoices for work that is not part of the fostering payment.

Providing a clear breakdown helps DWP distinguish fostering payments from earnings. Report changes such as ending a fostering placement, changing agency, becoming employed by the agency, or starting and stopping other work. Keep copies of messages and documents submitted through your journal so that you can refer back to what you reported.

If DWP includes the allowance as income

Read the Universal Credit statement carefully if your award is reduced. Check whether DWP has treated the payment as fostering income, wages or another type of income, and whether the amount relates to the correct assessment period. If the decision appears wrong, ask DWP to explain how the payment was classified and provide the fostering payment breakdown and supporting evidence.

You can request a mandatory reconsideration if you believe the decision has applied the rules incorrectly. The decision notice will explain how to do this and the relevant deadline. Specialist welfare rights advice can help where a payment combines fostering income with employment income or where the issue is linked to other changes in your household.

Fostering allowance and Universal Credit are separate systems, and the treatment of fostering payments for tax or other benefits may not be identical to their treatment under Universal Credit. Check each payment separately and avoid relying on a payslip label alone. Your fostering service can provide information about how its payments are structured, while DWP decides how your Universal Credit claim is assessed.