When it comes to fostering and tax, it can quite often become confusing. Foster carer tax allowance, or the amount that you can earn as a foster carer before having to pay tax on your earnings, can sometimes feel like a grey area with differing guidance available for foster carers. However, we are here to simplify the process and explain exactly what you are entitled to as a carer.
The Spring Budget 2023 saw some significant changes to the foster carer tax relief system – which has been great news for foster carers!
Do foster carers pay tax?
We are often asked ‘do foster carers pay tax?’. Foster carers are entitled to Qualifying Care Relief (QCR). QCR allows foster carers to receive payments from their fostering agency up to a certain amount tax free.
There are two aspects to the Qualifying Care Relief available to foster carers:
- A fixed amount of £18,140 for each household for a full year
- A weekly tax relief allowance for each child in your care:
£375 per week for each child aged under 11
£450 per week for each child aged 11 or over
The increase in tax relief means that foster carers will likely be able to keep the majority, if not all, of the money they receive as part of their fostering allowance.
Foster carer tax allowance examples
We know it can be quite overwhelming to understand what impact the tax relief has, so we’ve provided some examples below:
Simon is a TACT foster carer and looks after one young person (aged 16) for a full tax year.
Simon receives £28,912 in one year from TACT as his fostering allowance.
Qualifying care relief: £18,140
Foster carer weekly tax relief: £23,400
Total tax relief available: £41,540
This means that Simon is entitled to earn up to £41,540 tax free in one year. Simon will not need to pay any tax on the £28,912 he has received from TACT.
Maureen is a TACT foster care and looks after a sibling group (aged 8 and 14) for a full tax year.
Maureen receives £43,524 in one year from TACT as her fostering allowance.
Qualifying care relief: £18.140
Foster carer weekly tax relief: £19,500 (tax relief for the 8 year old) + £23,400 (tax relief for the 14 year old)
Total tax relief available: £61,040
This means Maureen is entitled to earn up to £61,040 tax free in one year. Maureen will not need to pay any tax on the £43,524 she has received from TACT.
Read more about our fostering allowances, and the other benefits you could receive as a TACT foster carer.