What records should foster carers keep for Qualifying Care Relief?

Records for Qualifying Care Relief should show how much fostering income you received, which tax year it relates to, and how you arrived at the amount covered by the relief. A well-organised record trail helps you complete Self Assessment accurately, identify any taxable amount, and answer HMRC queries without relying on memory.

Keep a separate fostering income record

Record each payment received from your fostering service, local authority or other relevant organisation. For every entry, note:

• the date the money reached your account;
• the amount received;
• the organisation that made the payment;
• what the payment was for, such as an allowance, fee, adjustment or reimbursement; and
• the tax year to which it belongs.

Do not rely solely on a bank statement, as the payment reference may not explain the nature of the money. Keep the related payment schedule, annual statement or remittance advice as well, particularly where one payment combines several elements.

It is also sensible to distinguish fostering receipts from other household income. This is especially important if you or your partner have employment, self-employment, pension or other income, because Qualifying Care Relief applies to qualifying care receipts rather than to all money paid into the household account.

Keep detailed placement and care information

Your working papers should make it possible to understand which payments relate to which care arrangements. Depending on your circumstances, this may include the start and end of each placement, periods of respite or interruption, and whether more than one child was in your care during the same period.

These details can be recorded using dates, reference numbers or initials rather than unnecessary personal information. Tax records should contain enough information to support your calculation, but they should not include extensive confidential details about a child’s history, health or family circumstances. Store records securely and keep access limited to people who need them.

Record how you dealt with expenses

Qualifying Care Relief is not simply a claim for every cost connected with fostering. If you include expense information in your working papers, explain what the cost was for, how it was calculated, and why it was connected with your fostering activity. For shared household costs, record the basis used to identify the fostering-related proportion rather than estimating an amount without an explanation.

For travel, a mileage log should identify the date, destination, purpose and distance of each journey. For larger purchases or costs used partly for private purposes, retain the receipt and note how you treated the private element. This creates a clearer audit trail if you later need to check whether an item is relevant under the tax rules.

Keeping these details does not automatically mean that every expense can be deducted from fostering income. The treatment depends on the applicable tax rules and the method being used, so avoid reducing your receipts by unsupported or purely personal costs.

Keep your calculation for each tax year

At the end of each tax year, prepare a short summary showing:

• the total qualifying care receipts;
• the qualifying amount available for the relevant household and care arrangements;
• any amount that falls outside the relief; and
• the figure used in your tax return, if one is required.

Keep the calculation even where the relief covers all of the relevant receipts and no taxable fostering profit arises. A summary makes it easier to explain why no tax was due on the fostering income and provides a consistent starting point for the following year.

Where two foster carers share responsibility for the same household, agree how the records and any taxable amount are allocated before completing separate tax returns. The allocation should reflect the actual arrangements and be supported by the payment information and your written working papers. Do not report the same fostering receipts in full on more than one person’s return.

Use reliable records and correct mistakes promptly

Digital spreadsheets, accounting software, paper folders or a combination of these can all work. The important points are that entries are complete, dated and understandable, and that changes can be identified. Keep copies of electronic statements and scan paper documents where appropriate. Make a note explaining any correction instead of deleting an original entry without leaving an audit trail.

Reconcile your income record against bank statements and payment schedules during the year. This can identify missing payments, duplicate entries, returned funds or year-end payments recorded in the wrong tax year. Keep correspondence about amended payments or disputed amounts with the relevant calculation.

How long should records be kept?

Keep records for the period required by HMRC for the type of return you submit. The retention period can differ depending on whether you are completing Self Assessment and the circumstances of a late or amended return, so check the current HMRC guidance rather than relying on an old filing date. Do not dispose of records simply because a return has been submitted or because no tax was payable.

If you are unsure whether a payment is a qualifying fostering receipt, how to divide records between joint carers, or whether a cost has a place in your calculation, seek advice before submitting your return. Your fostering service may be able to explain the nature of its payment statements, while HMRC or a suitably qualified tax adviser can clarify the tax treatment.