foster carers tax allowance

Foster carers tax allowance

Do foster carers pay tax?

While fostering allowances are taxable, HMRC has specialist tax rules for foster parents which means the income you receive from fostering will generally be completely tax-free.

These specialist tax rules, Qualifying Care Relief, are available for all types of foster care placements, including respite, staying put and parent and child.

Qualifying Care Relief is made up of two parts:

  1. Annual fixed amount - £18,140
  2. A weekly tax relief allowance based on the age of the child:
    • Under 11 years old - £375
    • 11 years old or older - £450

If you receive an income that's higher than your Personal Tax Allowance and Qualifying Care Relief - from another source of employment, for example, then you may be required to pay some tax.

How do I work out my fostering tax allowance?

Working out your taxable income from fostering is simple and can be completed by following these steps...

Step 1 - Work out your total annual income from fostering

First, work out the total amount of annual income received from your fostering agency or local authority. This should include:

  • Weekly fostering allowance
  • Holiday payments
  • Clothing allowances
  • Mileage claims
  • Respite payments
  • All other reimbursed expenses

This is your ‘total income’.

Step 2 - Work out your fostering tax relief

Every fostering household receives £18,140 of qualifying care relief for a full year. In addition, you’ll also receive a weekly tax relief allowance for each child in your care. The amount of relief you receive varies depending on the age of the child:

  • £375 per week for children under 11
  • £450 per week for children aged 11 and over

To work out your total qualifying care relief, multiply the number of weeks that a child has stayed with you by the relevant amount (as above), then add £18,140.


Susie has been caring for Ben (aged 7) for the full tax year. Susie will receive £20,400 in tax relief. £18,140 + (£375 x 52)

John has been caring for Lily (aged 6) and Dylan (aged 14) for a full tax year. John will receive £36,000 in tax relief. £18,140 + ((£375 x 52) + (£450 x 52))

Extra tip – Keep a record of the days that a child arrives and leaves your care

The weekly tax relief allowance runs from Monday to Sunday. So, if a child stays with you for 1 night, you’ll be entitled to 1 week of tax relief. If the child comes to you on a Saturday and leaves on a Tuesday, while it’s only 3 nights, you’re entitled to 2 weeks of tax relief. Make sure you keep a record of the days in which children arrive and leave from your care and submit it correctly on your tax return - or provide the information to your accountant.

Step 3 - Work out your taxable income

The final step is to work out how much of your fostering income you’ll need to pay tax on. To achieve this, simply subtract your fostering tax relief (step 2) from your total income from fostering (step 1).


Susie receives £19,172 from fostering Ben (aged 7) and is eligible for £37,640 in foster parent tax relief. She will not pay tax on her income from fostering.

John receives £39,974 from fostering Lily (aged 6) and Dylan (aged 14) and is eligible for £61,040 in foster parent tax relief. He will not pay tax on his income from fostering.

Download our finance guide today

Discover everything you need to know about fostering allowances, tax relief, benefits and pensions by downloading our Guide to Fostering Finances.

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tax and fostering

Things that may affect how much tax you’ll pay

Generally, income from fostering is tax-free. However, there are a number of factors that will determine how much tax you’ll pay, including:

  • The number of children you have in placement
  • Whether you’re paid an enhanced fee for a child in your care
  • Whether you operate as a partnership for tax purposes
  • Whether you receive any other income – e.g. a part-time job

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Download our brochure and discover everything you need to know about fostering with Orange Grove.

Frequently asked questions

Are foster parents self-employed?

Yes, foster parents are classed as self-employed, so make sure you register yourself as self-employed as soon as you start caring for your first foster child. Once registered, you’ll then be required to complete a tax return every year.

You can register yourself as self-employed in three relatively straightforward ways:
1. Register online here
2. Complete a CWF1 form available online
3. Call the newly self-employed helpline on 0300 200 3504

Do foster parents need to complete a tax return?

Yes, as foster parents are classed as self-employed, you’ll need to complete a tax return every year while fostering. The end of the tax year is the 5th April and you have until 31st January to get your tax return submitted. If you miss the deadline, you’ll receive a £100 penalty from HMRC, so make sure you get in early.

You can only submit one self-assessment, so make sure any other sources of income are included within the same tax return. Within your self-assessment, make sure you tick the box for ‘If you are a foster carer or shared lives carer, put ‘X’ in the box’.

Do foster parents need to keep receipts for all expenses?

No, there’s no need to keep a record of your day-to-day expenses, as the Qualifying Care Relief represents the standard costs associated with fostering – for example, mortgage or rental payments, heating, electric, food, clothing, etc.

However, depending on the young person in your care and their needs, you may find yourself with additional, tax-deductible costs that are associated with their care; however, evidence of costs is required, so make sure you keep your receipts for these additional costs.

There’s no set list of things that can be deducted on your tax return, each case is handled individually. So, make sure you keep a tab of any additional costs you may be enduring. For example, you may have a child who frequently wets the bed, therefore receipts from the additional washing powder should be stored.

More FAQs

Got some more questions? Find out the answers here.

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National Insurance

Generally, foster parents don’t have to pay National Insurance contributions because often their income is less than their qualifying care relief. However, some may decide to continue to pay Class 2 voluntarily, so they can secure their entitlement to state benefits, such as retirement pension and others.

Find out more

Claiming benefits

Becoming a foster parent shouldn’t impact your eligibility to receive means-tested benefits, such as income support, child benefit, housing benefit and more. That’s because the foster parents pay isn’t classed as income and so your benefits shouldn’t be affected.

Find out more

do foster carers pay tax

Generous fostering allowances

You’ll receive a generous fostering allowance while a child's in your care, designed to recognise your professionalism and commitment. We also offer other benefits, such as allowances for birthdays and religious festivals, as well as two weeks paid respite.

Plus you'll have access to our rewards platform, where you can find hundreds of discounts to some of your favourite shops, restaurants and family experiences.

Fostering allowance

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