Making the most of the allowances you are paid for the great work you do in Fostering will make your allowance go further. Claiming the right tax allowances for your situation are key to making the most of what you have been given. Read on to find out some of the special arrangements available to Foster Carers.
Foster carers are not usually treated as direct employees by the agencies. As a foster carer you are classed as self-employed and you will need to make sure that you register as such with the HMRC and you will also have to pay your own national insurance and complete a tax return at the end of the year to work out how much tax you will need to pay on your fostering fees. HMRC call this scheme “Qualifying Care Relief”. Here are five important facts that you should know about before making your next return:
- Foster carers who are approved to foster can claim an extra tax relief
There is tax relief available to foster parents of £10,000 per household per year. That means the first £10k of foster allowance per year is tax free.
- Placement relief is also available
There is a further tax relief available of up to £ 250 per week each child for every week that you have a foster child/placement in your home that attracts a fostering allowance. This takes account of the costs you will incur looking after foster children and recognises the value of this activity to society.
- Keep records of placements
Its very important that you keep clear records of your placements such as the logs you write or a diary showing when children where in placement. You should also record all the payments that you receive and any expenses you incur. HMRC may want to see these to prove your activities are eligible for this tax relief. Some fostering agencies will help you to confirm this by providing their records to further strengthen your evidence.
- Fostering Allowances are not considered part of most means tested benefits
If you are fostering and you are claiming means tested benefits such as:
- Job Seekers Allowance
- Housing Benefit Council Tax Reduction
- Disability Living Allowance
- Income Support
- Working Tax Credits
you should make sure that you declare your fostering income but it will not be counted against your means testing when you apply for any benefit.
- You can share the tax burden with your partner
If after you have allowed for your tax relief there is still some “profit” you can share this with a partner if you decide to declare this as a fostering partnership. That way you can share the remaining tax burden and use each other’s personal tax allowances as well.
- Discounted Council tax
In some circumstances, depending circumstances and on the people living in your home may be able to have your council tax reduced by up to 100%. Each local authority has rules and eligibility criteria called the “Council Tax Reduction Scheme”. So check it out on line or speak to your local authority to find out if you qualify.
- Housing Benefit
If you rent your property, you may be entitled to claim claiming housing benefit for children that you are caring for in your home. You can also claim for up to 52 weeks for a bedroom that is reserved for a foster child but is currently unoccupied. Again keeping records and getting your fostering service to support your application will help.
Its important to understand that every person’s tax situation is unique so please take independent qualified advise where you can. One source is the HMRC e-learning site : http://www.hmrc.gov.uk/courses/syob2/fc/index.htm
So when you are considering the costs and benefits to you of fostering take into account the generous additional tax allowances the government have set aside for people who help to care of looked after children in their own homes.