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Do foster carers need to pay tax?
It will depend on a number of factors, including the total amount of fostering payments you receive and if you have taxable income from another source such as work or a pension. However the majority of foster carers do not pay tax on their fostering payments. All foster carers need to register with HM Revenue and Customs and complete an annual tax return, even if you do not need to pay tax on your fostering payments.
Since April 2003, all foster carers have been treated as self-employed (including foster carers who provide respite care and family and friends foster carers). At this time, HM Revenue and Customs (HMRC) introduced a specific tax scheme for foster carers known as 'foster care relief'. In April 2010, foster care relief was extended and renamed ‘qualifying care relief’ (QCR).
All foster carers are treated as self-employed for tax purposes. There is a specific tax scheme foster carers can use called Qualifying Care Relief. The scheme calculates a tax threshold unique to the fostering household and when compared with their total fostering payments, determines if a foster carer has to pay any tax from their fostering or not. For many foster carers their total fostering payments are below their tax threshold and they do not have to pay any tax.
