Foster carers are subject to special tax rules under the Qualifying Care Relief (QCR) scheme, which simplifies the tax treatment of their income. This scheme helps foster carers reduce their tax liability by allowing them to claim specific reliefs based on the number of children or adults in their care.
The Two Accounting Methods for Foster Carers
There are two main methods foster carers can use to calculate their taxable income:
The Simplified Method (Qualifying Care Relief)
- This method allows foster carers to claim a fixed tax-free threshold.
- The 2024/25 tax year qualifying care relief is calculated as:
- A fixed amount of £18,140 per year, per household
- A weekly amount for each cared-for child or adult:
- £375 for each child under 11 years old
- £450 for each child aged 11 or over
- £450 for each adult in care
- If the total fostering income is below this threshold, the carer does not pay tax on their fostering earnings.
The Profit Method
- This method involves calculating income and expenses in the same way as a business.
- Foster carers report their total fostering income and deduct any allowable business expenses.
- If the income exceeds the qualifying care relief, tax is payable on the profit after deductions.
Our foster carer accountants can help you determine which method is most beneficial for your specific circumstances.
Common Tax-Deductible Expenses for Foster Carers
Foster carers can deduct several expenses to reduce their taxable income. These include:
- Household expenses (proportion of rent/mortgage, utilities, and council tax)
- Food and clothing for the children in care
- Travel expenses related to foster care duties
- Training and education related to fostering
- Insurance costs (public liability, home insurance adjustments)
- Medical check-ups and vaccinations related to fostering
Our foster carer accountants ensure that all applicable deductions are claimed, helping you save money on your tax bill.
How to Register for Foster Carer Tax Return
If you're a new foster carer, you must register for self-assessment with HMRC to declare your fostering income. Our team can assist you with:
- Registering for a UTR (Unique Taxpayer Reference) Number
- Completing the self-assessment registration process
- Filing your first tax return
We offer a free self-assessment registration service for new foster carers to help them get started.
Deadlines for Foster Carer Tax Return
Foster carers must file their self-assessment tax return annually. Key deadlines include:
- 5 October – Deadline to register for self-assessment if you are a new foster carer
- 31 January – Online tax return submission deadline
- 31 January – Payment deadline for any tax owed
