How does tax work when two people foster together?

When two people foster together, they do not usually receive one joint tax allowance or submit one joint tax calculation. Each person’s share of the fostering receipts and qualifying care relief must be reflected in their own tax position. The correct allocation depends on who is approved to foster, who receives the payments and whether the arrangement is operated jointly.

There is no joint tax return for couples

Marriage or civil partnership does not create a joint income tax return in the UK. Each person is responsible for their own income, tax return and tax due. This applies even where the couple:

• live at the same address;
• use a joint bank account;
• care for the same child or children; or
• receive fostering payments into one account.

A joint bank account does not, by itself, prove that fostering income belongs equally to both people. The tax treatment should reflect the actual fostering arrangement and the records supporting it.

How qualifying care relief is shared

Qualifying care relief is calculated by reference to the fostering household and the care provided. It includes a fixed household element and an additional amount linked to the number and ages of the children cared for during the tax year. The available relief is then allocated between the people who are jointly responsible for fostering.

Where two approved foster carers foster as a couple, the relief is commonly divided between them. The split should be consistent with the way the fostering income is allocated and with the arrangement recorded with the fostering service. It should not be claimed in full by both people, as this would duplicate the same relief.

The relief is not a payment from HMRC and it does not automatically mean that no tax is due. It reduces the amount of fostering income treated as taxable. If receipts allocated to a person exceed the relief allocated to that person, the remaining amount may form part of their taxable income, subject to their wider tax position.

When only one person is the foster carer

It is important to distinguish between two people living in a fostering household and two people who are both carrying on the fostering arrangement. If only one person is approved and named as the foster carer, the payments may belong to that person for tax purposes. The other adult does not automatically acquire a share simply because they help with day-to-day care or live in the home.

In that situation, the named carer should normally keep the fostering income and relief calculations in their own records. If the other person later becomes an approved carer or the contractual arrangement changes, the allocation should be reviewed from the relevant date rather than changed informally for the whole tax year.

When both people foster jointly

If both people are approved and jointly provide foster care, they should agree and document how the receipts and qualifying care relief are divided. An equal split may be appropriate in some households, but it is not safe to assume that every couple has the same arrangement. The agreement should match the fostering service’s records and the practical responsibilities of each carer.

Keep evidence such as:

• the approval details for each foster carer;
• the fostering agreement and payment statements;
• the dates on which each person was approved or began fostering;
• the agreed allocation of receipts and qualifying care relief;
• records of children placed in the household and the relevant care periods; and
• details of other income received by each person.

If the fostering service pays everything to one person, do not simply divide the amount on a tax return without checking the underlying agreement. The payment route may be convenient, but it is not the only factor HMRC may consider.

How other income affects each person

Any taxable fostering income left after the relevant relief is considered alongside the same person’s other income. For example, employment income, pension income, property income or income from another self-employed activity may affect whether tax is due and which tax rates apply. The other partner’s income is not normally combined with it for income tax purposes.

This means that an allocation which appears equal may not produce the same tax result for both people. One person may already have used some or all of their available tax bands through employment or another source of income, while the other may have a different position. An allocation must still be genuine and supportable; it should not be changed solely to produce a preferred tax outcome.

Expenses and records

Qualifying care relief is an alternative way of recognising the costs associated with approved care. If actual expenses are considered instead, the costs must relate to the fostering activity, be properly recorded and be allocated to the correct person or arrangement. The same cost cannot be used more than once, and a cost covered by the chosen relief should not also be deducted separately.

Both carers should retain payment statements, receipts and a clear record of how household costs were treated. This is particularly important where one person pays most of the bills or where the fostering payments pass through a single account.

Self Assessment and professional advice

Each carer should consider their own Self Assessment responsibilities rather than assuming that one return covers both people. The need to register or file can depend on the amount of taxable income, other income and the individual’s wider circumstances.

Fostering arrangements can change during a tax year, particularly when one carer is newly approved, a placement starts or ends, or the payment agreement changes. Review the allocation whenever this happens. If the position is unclear, both carers should ask HMRC or a suitably qualified tax adviser before filing, and keep a written record of the advice received.