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Are Foster Carers Employed or Self Employed?

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When you become a foster carer, you receive an allowance for each child placed in your care. The amount of money you receive will differ depending on the age of the child and the number of children in your care along with any individual needs they may have. This financial support is classed as an income and like all earnings, it will be taxed.

What many people don’t realise is that foster carers are classed as self-employed. This means, you are responsible for paying your own taxes. However, there is a very generous allowances for foster carers, so depending on how much you earn; you may not need to pay any taxes at the end of the year.

Registering as Self-Employed

Registering as a self-employed foster carer is simple and straightforward. The HMRC website makes it easy to register online. Carers are advised to take advantage of the Qualifying Care Relief scheme, which is specifically designed for foster carers. This offers additional tax relief, meaning you may end up paying very little taxes at the end of the year.

Once you’ve registered, you will need to start keeping records. Each time you foster a child you will need to keep a record of their age and the exact dates you looked after them, along with any extra payments and details you may need.

Filling Out Self-Assessments

When you’re self-employed, you are responsible for paying your own taxes. This means you’ll be required to fill out a self-assessment tax return form each year. The deadline for completing and returning this form is always January 31st. Again, this can be done online on the HMRC website and it usually takes around half an hour to complete.

The purpose of this form is to calculate your earnings over the previous year and the amount of tax owed.

Understanding Tax Relief

We mentioned earlier that foster carers receive additional tax relief. Currently, everyone who is registered as self-employed can earn up to £10,000 without being taxed. Through the Qualifying Care Relief scheme, this tax-free threshold can increase significantly.

The amount of tax relief you receive will depend upon the number of children fostered during the tax year, their ages and the length of the placements. Typically, if you foster a child under the age of 11, you will receive a tax-free income up to £200 per week. For children over 11, it’s £250 per week tax-free.

We know becoming a foster carer can involve a lot of changes including registering as self-employed. However, there is plenty of help and advice online, particularly on the HMRC website and we’re always here to answer any questions.

If you would like to take the first step to becoming a foster carer then request a callback here.