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How will fostering affect my finances?

For anyone considering becoming a foster carer there are always huge amounts of questions and one of the major ones is how finances will be affected. In this blog we attempt to answer the most frequent three questions that we’re asked.

 

What will happen with my tax?

If you’ve normally been employed in a job your tax is taken out of your pay packet before it reaches you, but foster carers are counted as self-employed. You’ll need to register with HMRC as self-employed as soon as you start caring for your first foster child. You can do this really easily by visiting the HMRC website.

Your foster carer allowance is taxable because it’s counted as an income, but there are special tax rules for foster carers known as Qualifying Care Relief. This means that you can receive a certain amount of money from your allowance tax free.

Once you have added your weekly fostering allowance, reimbursed expenses, holidays, clothing allowances, mileage, and respite payments, you can then deduct your Qualifying Care Relief.

  1. A fixed amount of £10,000 for each household for a full year
  2.  A weekly tax relief allowance for each child in your care:
    a. £200 for children under 11
    b. £250 for children aged 11 or over

Anything that you earn above this will be taxed.

A handy note to remember is that the weekly allowance runs from Monday to Sunday. That means that if a child stays with you for 1 night you will receive 1 week’s tax relief. If you have a child staying with you from Friday to Monday, that entitles you to 2 week’s tax relief.

Does that mean I’ll need to fill in a tax return?

Yes, you’ll need to fill in a self-assessment tax return. The tax year ends on 5th April each year and you have until 31st January the following year to complete your return. Most of your day to day expenses are covered by Qualifying Care Relief so you don’t need to save receipts unless you have a young person in your care who has specific needs and expenses.

Your National Insurance contributions will be calculated from your tax return. At a basic level as someone who is self-employed you’ll be registered for Class 2 National Insurance contributions.

Will I still be able to claim any benefits?

Even though you pay tax on your foster carer allowance, payments from fostering don’t count as income when applying for benefits. This means that you may be able to claim for the means tested benefits listed below:

– Carers Allowance (fostering income is disregarded)
– Income Support
– Working Tax Credit
– Child Tax Credit
– Jobseeker’s Allowance (income based)
– Housing and Council Tax Benefit

– Disability Living Allowance (DLA)
– Personal Independence Payment
– Attendance Allowance
– Universal Credits and other forthcoming changes to the benefits system

You are not alone!

If you join the Affinity Fostering Family, you are not going to be alone, we are here to help and support you with all aspects of your foster caring experience.  Get in touch with our team on 01245 237158 or email on info@affinityfostering.com.  You may also find our page on finances and allowances helpful.

 

Categories: Carers

Tags: Finances

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