Fostering income rules

Taxable fostering income

The general rule is that taxable income is taken into account in calculating someone’s Child Tax Credit and Working Tax Credit.

This includes someone’s income from employment and self-employment, foster carers are classed as self employed.

However, the current rules mean many UK foster carers now pay no tax on the money they earn from fostering.

If foster carers total foster care receipts are less than their qualifying amount, the profit from foster caring for both tax and tax credit will be nil.

Fostering allowances which qualify for tax relief are ignored:

  • currently up to £10,000 per year
  • £200 per week for each child under 11
  • £250 for each child 11 or over.

Support and Job Seekers Allowance

The rules about remunerative work are different for income support (IS) and jobseeker’s allowance (JSA).

In some cases a foster carer might be able to claim either Working Tax Credit or Income Support, Job Seeker’s Allowance or both.

Pensions

From 6 April 2010, parents and carers are able to build up qualifying years through new weekly credits for the basic State Pension and additional State Pension. If you are a parent or carer, you will get a credit for each week in which you:

  • are getting Child Benefit for children aged under 12
  • are an approved foster carer
  • are caring for at least 20 hours a week for people who are getting Attendance Allowance, the middle-rate or highest-rate care component of Disability Living Allowance, or Constant Attendance Allowance, or the need for care has been certified.

There will be no limit to the credits awarded to parents and carers after April 2010, as long as you meet the qualifying rules.

If you reach State Pension age on or after 6 April 2010, complete tax years of Home Responsibilities Protection you have already built up before 2010 have been converted into qualifying years up to a maximum of 22 years. These qualifying years will also count towards bereavement benefits.

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