Foster carers are treated as self-employed for tax purposes. There is a simplified income tax scheme for foster carers, sometimes referred to as ‘foster care relief’; from April 2010 onwards it will be called ‘qualifying care relief’. The scheme uses an income threshold to determine how much tax, if any, is due.
Anyone who is self-employed must register to pay Class 2 National Insurance Contributions. Where foster care is the only source of self-employed income and taxable profit is low, a foster carer may apply for the Small Earnings Exception.
Further information about tax and national insurance is available on HM Review and Customs website:
Qualifying care relief for carers: HS236 Self Assessment helpsheet (external website)
For more advice on fostering, tax and national insurance contact:
Fosterline on 0800 040 7675