Income Tax and national Insurance

Foster carers are treated as self-employed for tax purposes. There is a specific tax scheme foster carers can use called qualifying care relief. The scheme calculates a tax threshold unique to the fostering household which determines if a foster carer has to pay any tax from their fostering. 

Anyone who is self-employed must register to pay Class 2 National Insurance Contributions. If a foster carer’s taxable profit from self-employment is nil or below the threshold they automatically qualify for the Small Profit Threshold (SPT) and will be exempt from paying the contributions. The individual circumstances of the foster carer will determine if this is the best option for them or whether they have to make other arrangements to maintain their national insurance record. 

Further information about tax and national insurance is available on HM Revenue and Customs website or via this HMRC help sheet.