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Fostering Allowances and Taxes

October 15, 2019 | matt

It can be a touchy subject, but the bills do need to be paid.  Find out what you need to know about foster carer allowances and taxes.

Piggy Bank - Fostering Allowances and Taxes

Most people don’t get into fostering for the pay, trust us, there are easier ways to earn a living. 

People who foster are motivated by a desire to make a difference.  But the bills still need to be paid and we normally expect at least one foster carer to be available full-time, so fostering allowances are important.

This could be part of the reason why many carers prefer to foster with agencies instead of a local authority.  Not only is there better support in most cases, but most agency foster carers are paid significantly more than their local authority counterparts.

Here we’ll cover how UK fostering allowances work, what you can expect to receive and how fostering allowances can affect taxes.

Fostering Allowances

Short answer: fostering allowances vary quite a lot.

Factors which affect fostering allowances include;

  • - The agency you foster with
  • - The training & experience of the foster family
  • - The age, needs and behaviours of the child or children you care for
  • - The responsible local authority

As an agency foster parent you should expect to receive between £360 - £550 per week for each child in your care.  This is considerably more than the governments national minimum rates of between £129 - £194 per week.

For Family Care, our fostering allowance is broken down into two parts – a boarding-out fee and a professional fee.  The boarding-out fee is paid to cover the daily costs of caring for a young person.  The professional fee is a payment made to recognise the skills of the carer and is based on the foster carer’s registration.

Our professional fee has three grades (Band A, B and C) and foster carers move up the grades as their skills develop and they gain more experience.  To reach the highest grade (Band C) foster carers must complete a training programme culminating with a Level 3 Diploma for the Children’s and Young People’s Workforce, all of which is fully funded.

In addition, mileage is covered to/from training and support groups for our foster families (25p a mile) and they receive 2-weeks annual leave payment every year.

Fostering Allowances and Taxes

Fostering families benefit from a fixed tax exemption of up to £10,000 per year (pro-rata) which is shared equally among foster carers in the home.  So, if you are fostering a young person all year round you will not have to pay tax on the first £10,000 of fostering income.

As well as the £10,000 fixed tax exemption, foster families get tax relief for every week (pro-rata) a child is in their care.  For children under 11 the tax relief is £200/week per child and for children over 11 it is £250/week.

WORKING EXAMPLE

Stephen has been fostering a 10-year old boy for the whole of the year, and his 16-year old brother for 7 weeks of the year.  Stephen will not have to pay tax on the first £22,150 he earns.

Fixed tax exemption = £10,000
Child A – 10 years old (52 x £200) = £10,400
Child B – 16 years old (7 x £250) = £1,750

Total = £22,150

This is a straightforward example of how tax works in fostering, but we are not tax experts and foster carers are classed as self-employed.  To help with this, our foster families receive membership to Foster Talk for accountancy and tax advice.  It is the foster carer’s responsibility to register themselves as self-employed and pay their own income tax & national insurance.  Membership to Foster Talk really helps with this.


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