When you become a member of the ACS team, you'll receive membership of Fostertalk an independent service which also provides tax advice to foster parents.
After all, working out tax as a self-employed person can be a little tricky, but our guide to tax and National Insurance will help.
How does tax for foster parents work?
Below are a few practical examples of how tax for foster parents is calculated to give you an idea of what your income could be. The examples shows that due to the generous tax allowance for foster parents, the fostering allowance equates to a much higher 'take home pay' rate than earning a similar amount via PAYE.
Example 1 - Doreen
Doreen fosters 2 children aged 8 and 12. She looks after them long term and they have been with Doreen for over a year. Alongside fostering Doreen works 14 hours a week in a local cafe. Her earning from the cafe are £9,000 per year.
Annual Salary - £9,000
Fostering income - £45,500
Addition fostering expenses such as additional mileage not covered by the fostering allowance - £1,500
Doreen's total fostering income is £47,000.
Doreen's total income is £56,000
Doreen is not eligible to pay tax as her salary from the cafe is below the personal tax allowance of £12,570 and her fostering allowance is below the Qualifying Care Relief which in Doreen's case would be £64,940.
Example 2 - Amir
In the tax year, Amir fosters a 12 year old boy for 32 week, a 6 year old boy for 40 weeks and a 16 year for 10 weeks.
Fostering is Amir's full time career and he has no other income.
Amir receives £35,900 from fostering. Amir's fostering Qualifying Care Relief is £52,040, plus his personal tax allowance means the amount he could receive in his fostering allowance would need to be over £64,610 before he was eligible to pay any tax.
If Amir had the same income in a salaried role, Amir would have had to pay £4,666 in tax. So his income is the equivalent of an employee on PAYE earning over £40,000 a year.
Example 3 - Sarah
Sarah runs her own small business, working as a mobile hairdresser, which she manages alongside fostering.
Sarah fosters two siblings aged 12 and 14. Both children have been in with her for 5 years.
Sarah's business profit from her hairdressing is £16,000. Alongside this Sarah's fostering income is £46,800.
Sarah has additional fostering expenses of £3,000 for mileage not including in her allowance.
Sarah's income for the year is £65,800.
Sarah's qualifying care relief for fostering is £64,940.
Sarah's fostering income is below the tax threshold due to the QCR, so she will not pay tax on his income. Sarah is eligible to pay tax on £3,430 of her mobile hairdressing profit once her personal tax allowance has been taking into account. Sarah's tax bill for the year will be £686.
An employee with the same net income would pay £10,646 in tax. Therefore Sarah has almost £10,000 a year more.
National Insurance for foster parents
As a foster parent, you are self-employed. Anyone who is self-employed must register to pay Class 2 National Insurance Contributions.
You must pay class 2 National Insurance contributions, if your make a profit from fostering (this is anything you have been paid for fostering which is over and above the qualifying care relief, detailed above.)
Because foster parents at ACS all fall under this threshold their National Insurance Contributions (NICs) is likely to be NIL.
Great rewards and benefits for foster parents
Our foster parents gain access to a range of discounts at many leading retainers, the ones listed below are just some of the great brands that offer our foster parents a discount. Discounts are also available in many restaurants and venues offering great family days out. Easy to use, discounts are applied instantly - so even if you're out shopping, you'll be able to make the most of your discounts immediately.
Fostering and your finances. Find out more...
Fostering allowance calculator
Our calculator will help you find out how much you could recieve if you become a full time foster parent with ACS.Read More
Tax & National Insurance
Find out how foster parents pay very low levels of tax, if any at all due to generous allowance provided by HMRC.Read More
Why choose ACS?
Regular supervision with your very own dedicated social worker
Generous fostering allowance and bonuses
Over 10 languages spoken
Local support where you need it
Small agency with a family feel