
Tax-Free Allowances for Foster Carers: What You Need to Know
11th February 2025
At Mulberry Foster Care, we understand that fostering is one of the most rewarding roles a person can take on, providing children with stability, love, and support when they need it most. In recognition of the invaluable work foster carers do, the UK government offers generous tax-free allowances to help ease financial concerns. These allowances mean that many foster carers pay little or no tax on their fostering income.
If you are a current foster carer or considering becoming one, it’s important to understand how these tax-free allowances work and how they can benefit you. Mulberry Foster Care is here to guide and support you every step of the way.
Understanding Tax-Free Allowances for Foster Carers
Foster carers registered with Mulberry Foster Care qualify for a special tax scheme called Qualifying Care Relief (QCR), which applies to income earned through fostering. Under this system, foster carers receive two types of allowances that determine how much of their fostering income is tax-free:
1. Fixed Tax Exemption
Every foster carer is entitled to a fixed tax exemption of £18,140 per year. This means that if your total fostering income falls below this amount, you do not have to pay any tax at all.
2. Weekly Tax Allowance Per Child
In addition to the fixed exemption, carers receive a weekly tax-free allowance per child in their care, which varies based on the child’s age:
- £375 per week for each child under 11 years old
- £450 per week for each child aged 11 or over
These allowances significantly increase the amount a foster carer can earn before tax is due.
How Does This Work in Practice?
To illustrate how these allowances work, let’s look at an example:
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A foster carer with Mulberry Foster Care looks after one child under 11 for an entire year.
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Their tax-free threshold would be:
- Fixed allowance: £18,140
- Weekly allowance: £375 × 52 weeks = £19,500
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Total tax-free threshold: £18,140 + £19,500 = £37,640
If the carer’s total fostering income is below £37,640, they will not have to pay any tax. If they earn above this amount, they will only be taxed on the portion exceeding the threshold.
For those caring for multiple children, the tax-free allowance increases significantly. For example, fostering two children under 11 for a year would give a tax-free threshold of £57,140 (£18,140 fixed + £39,000 weekly allowance).
What About National Insurance Contributions?
Even if you do not pay tax on your fostering income, you may still need to pay National Insurance (NI) contributions if your taxable income exceeds the NI threshold. However, many foster carers qualify for National Insurance credits, which help protect their eligibility for the state pension.
If you are fostering full-time and do not have other employment, you may be eligible for NI credits automatically. These credits ensure that you maintain your entitlement to benefits such as the state pension without needing to make voluntary contributions.
What If You Have Additional Income?
If you have another job or source of income in addition to fostering, your tax-free fostering allowance only applies to your fostering income. Any additional earnings from employment, self-employment, or other sources will be taxed separately based on standard HMRC tax rates.
Keeping Records for HMRC
While many foster carers do not have to pay tax, it is still essential to keep clear and accurate records of:
- Payments received for fostering
- The number of weeks a child has been in your care
- Any expenses related to fostering
These records will help you complete your Self-Assessment tax return, which foster carers must submit annually to HMRC. Even if no tax is due, completing a tax return ensures you are meeting legal obligations and can access any tax relief or benefits available to you.
How to Register for Qualifying Care Relief
If you are a foster carer with Mulberry Foster Care, you must register as self-employed with HMRC and complete a Self-Assessment tax return each year. The process is straightforward:
- Register as self-employed with HMRC if you haven’t already.
- Keep track of your fostering income and expenses.
- Complete and submit your Self-Assessment tax return by 31st January each year.
Most foster carers find that they do not owe any tax due to the generous allowances, but it’s still important to file a return to remain compliant with HMRC regulations.
Get Expert Advice with Mulberry Foster Care
If you are unsure about your tax obligations as a foster carer, consider speaking with a tax advisor or contacting HMRC’s foster care tax team for guidance. At Mulberry Foster Care, we also offer financial advice and support to help our carers navigate their tax responsibilities with ease.
Final Thoughts
Fostering is a life-changing role that makes a real difference to children in need. The UK government’s tax-free allowances help ensure that financial concerns do not prevent people from becoming foster carers. By understanding how these allowances work, you can make informed financial decisions and focus on what truly matters—providing love and care to the children in your home.
At Mulberry Foster Care, we are committed to supporting our foster carers every step of the way, from financial guidance to professional development. If you are considering becoming a foster carer and would like more information about tax allowances and financial support, get in touch with Mulberry Foster Care today!
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