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Self-Employed Foster Carers – How it works

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One of the biggest questions people thinking about fostering have is whether they will be classed as self-employed.

It can be confusing given the fact that you’re paid a weekly allowance from us, which would logically lead you to think you’re an employee of the agency. However, to the HMRC, foster carers are deemed as self-employed. This means you will need to register as a self-employed worker and file self-assessment tax returns each year.

What is tax relief?

As one of our valued foster carers, you’ll be entitled to additional tax relief.

When you’re self-employed, you automatically benefit from a tax-free income of up to £10,000. So, if your foster allowance adds up to less than £10,000 a year, you won’t have to pay any taxes.

Foster carers also benefit from additional tax-free earnings via the Qualifying Care Relief scheme. While the amount of tax relief you receive will depend upon the age of the children you foster, along with the length of time you foster them. However, as a general guideline, if you’re fostering children under the age of 11, you’ll typically be allowed £200 per week tax-free. Once a child reaches 11 years of age, the tax relief amount increases to £250 per week.

Will I need to keep records?

After registering yourself as self-employed, you will need to start keeping records of:

  • How many children you have fostered in the tax year
  • How long your placements lasted – including exact start and end dates
  • The ages of these children
  • Any allowances paid throughout each placement

Keeping these records makes it much easier to fill out your self-assessment tax return at the end of the year, and ensures you pay the right amount of taxes. As mentioned earlier, many carers find that after tax relief, they don’t actually owe any taxes. However, you will still need to keep accurate records regardless.

How difficult is it to register and complete a self-assessment tax return?

Many people find the thought of working out their own taxes extremely daunting but it’s not as difficult as you might think. The HMRC provide regular webinars and they even have an e-learning course for foster carers. This tells you everything you need to know about becoming a foster carer and managing your own taxes.

The self-employment registration process can be done online and there’s a simple step-by-step guide that takes you through it. The same applies when it becomes time to fill out annual self-assessments.

If you do find it confusing, we’re here to help; you can always call us with any questions.

If you’d like to start your fostering journey by becoming one of our self-employed foster carers then you can request a callback here.