Is foster carer pay per week taxable?

The practical test is not whether a payment is made weekly, but how your total fostering receipts compare with the tax relief available under HMRC’s qualifying care relief rules. Fostering payments are generally treated as self-employed trading income, with a special calculation designed to reduce or remove the amount on which tax is due.

Qualifying care relief provides a tax-free amount for approved foster carers. This is made up of a fixed annual element and an additional amount linked to the children placed in your care. The calculation can take account of factors such as the number of children, their ages and how long they are placed with you. The relief is applied to your qualifying fostering receipts for the relevant tax year.

If your fostering receipts are within the available relief, there may be no taxable fostering profit to report. If they exceed the relief, the excess is normally treated as taxable profit. This means that two foster carers receiving similar weekly payments could have different tax positions if their placements, household circumstances or other income are different.

• Weekly payments are not the same as a salary. Foster carers are usually not employees of the fostering service, so payment records should not be treated like payslips with PAYE tax automatically deducted.
• The relief applies to qualifying fostering income. You should distinguish fostering receipts from unrelated employment, self-employment, pension, property, savings or investment income.
• Excess income can affect your tax return. Where receipts are higher than the available qualifying care relief, the taxable part is considered alongside your other taxable income.
• National Insurance is a separate issue. Tax relief does not automatically settle any National Insurance responsibilities, so check the current HMRC position for your circumstances.

Foster carers should keep accurate records throughout the tax year. Useful records include payment statements, placement dates, the number and ages of children cared for, periods when a placement ended or paused, and details of any relevant fostering expenses. Your fostering service can explain the payments shown on its statements, but HMRC is responsible for determining how they should be reported for tax.

You may need to register for Self Assessment if your circumstances require it, particularly where you have taxable fostering profit or other income that is not taxed through PAYE. Registration and reporting requirements can depend on your wider financial position, so do not assume that having little or no taxable fostering profit means no action is needed.

It is also important to review your position when circumstances change. A new placement, caring for more than one child, a change in the child’s age, additional employment or a change in your household income can alter the calculation. Tax rules and HMRC guidance can also change, so use the current qualifying care relief guidance or speak to an accountant or tax adviser familiar with foster carers before completing a return.

In short, fostering payments are assessed using qualifying care relief rather than being taxed automatically as ordinary wages. Keeping complete records and checking the calculation for each tax year will help you identify whether any part of your fostering income is taxable and whether you have any reporting obligations.