When you’re looking into how to become a foster carer, it’s completely normal to wonder about money, allowances, and how tax works. You should never feel awkward about that. The fact is, it can all feel a bit overwhelming at first, but we’re here to help you understand the ins and outs of tax and foster care, leaving you to focus on the children in your care.
While “tax” can sound complicated, the system for foster carers is designed to be simple, fair, and supportive.
But, first, one of the most common questions: are foster carers self-employed when it comes to tax?
The answer is yes. Foster carers are classed as self-employed for tax purposes. But thanks to a special tax relief for foster carers called Qualifying Care Relief (QCR), most foster parents in Wales don’t pay any tax on their fostering payments at all.
This easy guide explains how it all works in a clear, friendly way, covering all the information you need when it comes to foster carers tax allowance and payments.
Remember, you’re never on your own. Your local Foster Wales team is always here to help.
do foster carers pay tax? everything you need to know
In basic terms, not usually. Foster carers are treated as self-employed, which means you need to register with HMRC and complete a tax return. That said, most carers across Wales don’t end up owing any tax because of Qualifying Care Relief.
Being self-employed for HMRC purposes doesn’t change your day-to-day role as a foster carer. It just guarantees that all fostering payments, also known as HMRC fostering allowance, are properly recorded. HMRC still asks that you register, complete a tax return for foster carers each year, and include all payments, even if your fostering payments are covered by QCR.
Thanks to QCR, most foster carers have the peace of mind that fostering payments are virtually tax-free. However, it’s still worth trying to understand your foster carers tax allowance, and a foster carer tax calculator can help you see how different payments affect it.
qualifying care relief: your tax cushion as a foster carer
Qualifying Care Relief (QCR) is an allowance that helps foster carers focus on the children in their care rather than worrying about tax. It’s kind of like a friendly cushion where, as long as your fostering payments stay under this limit, you won’t owe any tax.
For 2025/26, QCR provides foster carers with an annual household allowance of £19,690, plus weekly allowances of £415 for each child under 11 and £495 for each child aged 11 and above. Most foster carers fall comfortably below this threshold, especially if you’re a part-time, short-break, or respite carer.
how QCR and foster carers tax allowance work
Here are a couple of basic tax allowance calculations to show you how it all works:
| Category | Limit (2025/26) | Received |
|---|---|---|
| Household allowance | £19,690 | £100 a week “fee” or “skills” payment = £5,200 |
| Weekly child allowance | £415 × 52 weeks = £21,580 | £208 × 52 weeks = £10,816 |
| Total QCR / Foster Carers Tax Allowance | £41,270 | Total received = £15,808 |
| Note | In this example, if your fostering payments for this child are under £41,270, you don’t pay any tax. | |
example 2
Caring for two children (Ages 7 and 12) for a full year
| Category | Limit (2025/26) | Received |
|---|---|---|
| Household allowance | £19,690 |
£200 a week “fee” or “skills” payment = £10,400 |
| Weekly child allowance (child under age 11) | £415 × 52 weeks = £21,580 | £208 × 52 weeks = £10,816 |
| Child over age 11 | £495 × 52 = £25,740 | £208 × 52 weeks = £10,816 |
| Total QCR / Foster Carers Tax Allowance | (£19,690 + £21,580 + £25,740) = £67,010 | Total received = £34,932 |
| Note | In this example, even with two children, most foster carers fall below this, meaning fostering payments are effectively “tax‑free”. | |
quick-reference table: foster carers tax and allowances 2024/25
We understand that you are presented with a lot of new information when you start to foster, so here’s a handy table to see your foster carer’s tax allowance, weekly payments, National Insurance, and key deadlines at a glance:
| Additional Info | |
|---|---|
| Qualifying Care Relief (QCR) | Household allowance: £19,690 per year. Covers general household costs or the skills/fee payment you receive for qualifications/experience. Calculated pro‑rata if approved part‑year. |
| Weekly allowance per child | Under 11: £415/week 11 and over: £495/week Covers the child’s allowance for everyday costs. |
| Foster carer tax allowance total | Household allowance + weekly allowance × 52 weeks Example: 1 child aged 8 → £19,690 + £415×52 = £41,270 |
| HMRC fostering allowance | All fostering payments recorded for HMRC. Everything you receive must be included in the tax return for foster carers. |
| Self‑employment registration | Register with HMRC and get a UTR. Only one person per fostering household needs to register. |
| Deadlines | Tax year ends: April 5 Self‑assessment deadline: January 31 Keep records of placement dates, payments, and allowances. |
| National Insurance (Class 2) | £3.45/week (voluntary). Helps build qualifying years for the State Pension. |
| Small earnings threshold for NI | £6,725. Below this, NI is not required but may be paid voluntarily. |
| State Pension requirement | 35 qualifying years. Carer’s Credits often backdated up to 3 years. |
| Universal Credit (UC) | Fostering payments ignored. Carer’s Allowance is taxable; Disability Living Allowance is not. |
| Personal allowance | £12,570 — amount you can earn tax‑free from non‑fostering income. |
registering as self-employed for foster carers tax
Once you’ve been approved to be a foster carer (congratulations!), registering as self-employed is an important step for HMRC records. Ideally, you should register within a few months of approval, and no later than 5 October following the end of the tax year you start fostering. For example, if you were approved in March 2025, you should ideally register by June 2025, and no later than October 2025.
To register:
- Go to HMRC’s self-employment registration page
- Provide your details
- Receive a Unique Taxpayer Reference (UTR)
Only one foster carer per household needs to register, and you can use your approval date as your start date, even if a child hasn’t been placed with you yet.
Even if you foster as a couple and even if the payments are in joint names. HMRC will accept the tax information in one person’s name. Being registered just means that HMRC knows you’re claiming your foster carers tax allowance correctly and that all fostering payments are recorded accurately
completing your foster carer tax return
Filing a tax return for foster carers might feel intimidating when you first begin, but it is usually very straightforward, especially with QCR. You need to include all fostering payments, along with any non-fostering income ( ie. other self-employed income, wages from other employment, pensions, or Carer’s Allowance)
Most Foster Carers prepare their tax returns online using the Gateway. It will walk you through each step like a live form. You can choose to use paper forms but remember the deadline is much sooner (31 October rather than 31 January), it won’t add up your calculations.
When completing your Self-Assessment Tax Return, either online or by paper, if your Fostering payments are under the Qualifying Care Relief, all you have to do is enter Nil and tick the box to show that you are a Foster Carer, no actual figures are required.
Keeping simple records of your payments, placement dates, and any other allowances makes filing your foster carer tax return much easier and stress-free.
Why does HMRC need to know about my other income?
There is a section of the self-assessment tax return for any other income. This is where you tell HMRC about any other types of money you receive, such as PAYE earnings from another job, occupational or private pensions, or Carer’s Allowance, as these may still be taxable, but Disability Living Allowance for a child or adult is an exception.
Any pay you receive from other work will be taxed via your employer, but it still needs to be included. This will be stated in your P60 (or P45 if you’ve left that employment). This shows what tax you’ve already paid and at what tax rate band (20%, 40%).
Think of it as a return of total income, rather than just fostering.
QCR only applies to fostering payments, but most carers remain below the threshold for paying extra tax. Including all your income helps to connect up all tax paid on the HMRC system.
HMRC explain this section in their online webinars: https://www.gov.uk/guidance/help-with-employment-on-your-self-assessment-tax-return
What if I’m already self-employed?
You’ll already be registered as self-employed. Simply add fostering to your annual return, as 2 forms of self-employment. You don’t need to register again separately for fostering.
national insurance and state pension
Even if you don’t owe tax, understanding National Insurance (NI) is important for your State Pension. Foster carers may choose to pay voluntary Class 2 NI, which is £3.45 per week, and, if you do so, this helps build qualifying years towards your State Pension.
If your taxable income from fostering is over £6,725, your National Insurance contributions will be treated as paid. This means HMRC will credit them automatically, and no actual payment is due.
If your taxable income from fostering is below £6,725, Class 2 NI isn’t needed, but you can contribute voluntarily. To receive a full State Pension, you need 35 qualifying years. NI credits, sometimes called Carer’s Credits, can often be backdated for up to three years, and some carers continue contributing even after 35 years for extra peace of mind.
universal credit and other benefits
Foster carers can receive Universal Credit (UC) without their fostering payments reducing their entitlement. The fostering payments are excluded from UC calculations, which makes a real difference for families who rely on UC alongside fostering. Carer’s Allowance is taxable and must be declared, while Disability Living Allowance is not taxable and does not affect fostering tax.
Other allowances and reliefs still apply.
The standard Personal Allowance (£12,570) is the amount of income everyone can receive before paying any tax. This applies to non-fostering payments, as foster carers receive a higher exemption than this through QCR.
The Personal Savings Allowance is the amount of interest you can earn on your savings each year without paying tax on it. Everyone receives a £1000 personal savings allowance; if you have a higher taxable income (after QCR), this reduces to £500.
Council tax reductions or retainer payments count as fostering payments, and should be included in your tax calculations , meaning some foster carers pay reduced or no council tax, but the amount you receive off your bill is included in your tax return.
Remember when ticking the box on donations, Gift Aid can only be applied if you pay tax.
Foster carers are exempt from Making Tax Digital (MTD) where fostering is their only form of self-employment, meaning there’s no requirement to use specialist software or apps. You can learn more about MTD here.
deadlines and record keeping: our tips
Keeping on top of tax and foster care doesn’t have to be stressful. Follow our two simple pointers:
- When you start fostering, you should register as self-employed. The tax year ends in April, and the online submission deadline is the following 31st January. Don’t leave it until the last minute to avoid a hassle-free experience.
- Keep your payment statements, placement dates, and notes of any extra allowances safe. Keeping records simple and organised makes tax much less stressful and means you can claim your foster carers tax allowance properly.
getting support with tax and foster care
We can’t stress enough that you’re never on your own when it comes to figuring out foster carers tax allowance or completing your HMRC return.
As part of the support that every foster carer receives from Foster Wales, you have access to fostering tax experts. The online webinars as part of your TFN membership are excellent and run regularly to offer simple, step by step advice. The team of tax experts can walk you through how to fill in your form, answer questions and explain the tax for foster carers.
Fostering is very much a team effort, and that includes the practical side of things, like tax for foster carers. With the right guidance and a little planning, managing your foster care tax is much simpler than it first seems. Meaning you get to spend more precious time with the children in your care.
FAQs about tax and foster care
is fostering tax-free?
In most cases, yes. Thanks to QCR, fostering payments under the limit are not taxable, which is why many carers describe fostering as almost tax-free. Even if you have other taxable payments, your fostering payments are completely safe under QCR.
do I include PAYE payments even if already taxed?
Yes. You must still include any other payments in your tax return, such as PAYE wages. QCR only applies to fostering payments, so HMRC needs a full picture of your earnings to make sure they get the right calculation.
does only one foster carer need to register?
Yes, only one person or the “main carer” in a household needs to register as self-employed, even if you foster equally as a couple or family. This simplifies record-keeping and means HMRC has one point of contact for claiming the foster carers tax allowance.
do foster carers pay council tax?
It depends. Generally speaking, though, yes, foster carers pay council tax, although some local authorities offer different discounts depending on where you live. It’s important that, as a foster carer, you include this benefit as part of your tax return, to make sure you’re paying enough tax for the year.
do I need an accountant?
Most foster carers don’t need an accountant. With the short self-assessment forms and tools like a foster carer tax calculator, completing your tax return for foster carers is straightforward. Our team at Foster Wales is always here to help if you need us to break it down for you or if you want to request a statement of your payments.
can NI credits be backdated?
NI credits, sometimes called Carer’s Credits, can be backdated up to three years. This is useful if you’ve recently started fostering or didn’t contribute voluntarily before, as it helps you build qualifying years towards your State Pension.
is carer’s allowance taxable?
Yes, Carer’s Allowance is taxable and must be included in your tax return. Carer’s allowance is for other children or adults that you care for, for example, you also care for your own child or elderly parent. It does not impact your HMRC fostering tax allowance, but you must report it along with any other payments.
what about unusual costs and payments?
If there has been damage to carpets or cars, for example, which has been reimbursed by your local authority, this should be included on your tax return. If this unusually high payment takes you over the QCR, the expenses can be listed in the white space. This is the technical way to deal with it and just tells the tax office about it – that this is unusual income.
what do I need to say on the fostering tax return form?
When filling in your tax return, the “type of business” is foster carer. When asked on the government gateway – Are you a foster carer? – Tick Yes to being a foster carer.
do I need to complete a tax return as a special guardian?
If you continue to receive a fee for special guardianship, this will be treated the same as an adoption allowance. This is disregarded and outside the scope of the tax system. If you are a special guardian, you no longer need to complete a tax return, if you are solely SGO and no longer fostering.
what if I’ve not registered as self-employed yet?
The tax office doesn’t know about you until you tell them. The sooner the better. We advise that you inform them after a couple of months of being approved. A delay in informing them from your approval date or first placement is fine, so long as you’ve not reached a deadline for a tax return. When you register, you can list your date of approval, not your first placement date, as your start date. If you’ve been available to foster during that time, then that’s your start date. But HMRC will charge a penalty if you don’t register within 6 months after the end of the tax year you were approved.
