Do Foster Carers Pay Tax? Qualifying Care Relief Explained

Money is one of the most common things people worry about when they first think about fostering, and tax tends to be the part that feels most confusing of all. It’s completely understandable — most of us have never had to think about self-employment or Self Assessment before. The reassuring news is that the way foster carers are taxed is genuinely generous, and once it’s explained clearly it turns out to be far simpler than most people fear. Here’s a plain-English guide to how it all works, and why the majority of carers end up paying little or no tax on their fostering income.

Please note: this is general information to help you understand the basics, not personal tax advice. Figures are for the 2026/27 tax year and were last reviewed in July 2026. For your own situation, check the latest guidance on GOV.UK or speak to HMRC or an accountant — and your GLF supervising social worker can always point you in the right direction.

Are foster carers self-employed?

Yes — HMRC treats foster carers as self-employed, which means that when you start fostering you’ll need to register with them as self-employed and complete a Self Assessment tax return each year. That’s true even in the years where you work out that you owe no tax at all, because the return is how HMRC confirms your position. It can sound daunting written down like that, but in practice the registration is a one-off task and the annual return is a straightforward form once you know what you’re doing. Plenty of carers who never imagined themselves filling in a tax return find it becomes a simple yearly routine, and you’ll have support to get it right the first time.

The big advantage: Qualifying Care Relief

The reason most foster carers pay so little tax is a special scheme called Qualifying Care Relief (QCR), which lets you receive a substantial slice of your fostering income completely tax-free. Rather than asking you to add up every expense, it gives you a generous flat allowance made up of two parts that you simply add together:

• A fixed amount of £20,440 per household for the whole tax year, plus
• A weekly amount for each child in your care — £435 a week for a child under 11, or £515 a week for a child aged 11 or over.

Added together, these give you your qualifying amount: the total you can earn from fostering in a year before any tax becomes due. It’s worth knowing that an HMRC tax week runs from Monday to Sunday, and that having a child placed with you for even part of a week counts as a full week — so the weekly amounts add up quickly across a year.

A simple worked example

To see how favourable this is in practice, imagine you fostered one eight-year-old child for a full year. Your tax-free qualifying amount would be built up like this:

• Fixed amount: £20,440
• Weekly amount: 52 weeks × £435 = £22,620
• Your tax-free qualifying amount: £43,060

If your total fostering income for that year came to less than £43,060, HMRC would treat you as having made no taxable profit, so there would be no Income Tax to pay on your fostering income. Because the fostering allowance for a single child usually sits comfortably within that threshold, a great many carers find they pay no tax on their fostering income whatsoever. And remember, this is all before your personal allowance — the £12,570 that everyone in the UK can earn tax-free — is even taken into account, which is especially reassuring if you also have income from a job or a pension alongside your fostering.

The two ways to work out your tax

When you complete your tax return, you can choose between two different methods for calculating things, and you’re free to pick whichever leaves you better off each year:

• The simplified method (by far the most popular): your taxable profit is simply your total fostering income minus your qualifying amount. If that figure comes out at nil or a negative number, there’s no tax to pay and nothing more to work out.
• The profit method: instead of using the qualifying amount, you add up your actual fostering expenses and subtract them from your income. This only tends to benefit the small number of carers with unusually high costs, and it’s best used on the advice of an accountant or your fostering service, since it means keeping detailed records of everything you spend.

What about National Insurance?

National Insurance contributions count towards your State Pension and certain benefits, so they’re worth understanding even when little or no tax is due. Since April 2024, most self-employed people — foster carers included — no longer have to pay Class 2 National Insurance, which has simplified things considerably. There is an important point to be aware of, though: if Qualifying Care Relief means you have little or no taxable profit in a year, it can be well worth making voluntary Class 2 contributions, which cost only a few pounds a week. Doing so helps protect your State Pension record for years when your fostering profit is low, and it’s a common, sensible step that’s worth discussing with HMRC or an accountant.

How and when to register

The easiest way to register as self-employed is online, and the HMRC website guides you through the process step by step. Once you’re set up you’ll be issued a Unique Taxpayer Reference (UTR), and it’s well worth keeping your UTR, login details and records somewhere safe so tax-return time is stress-free. There are a couple of key deadlines to keep in mind:

• Register by 5 October following the end of the tax year in which you started fostering.
• File your tax return by 31 October if you’re doing it on paper, or by 31 January the following year if you’re filing online.

Keeping a few simple records through the year makes everything much easier when the time comes. Your end-of-year statement from your fostering agency will show your income, and it helps to keep a note of how many weeks you had children placed with you and their ages, since that’s all you need to work out your qualifying amount.

You won’t have to work it out alone

We know the tax side is rarely the reason anyone chooses to foster, and for many people it feels like the least appealing part of the whole idea — so at Greater London Fostering we make sure you’re never left to puzzle over it by yourself. Your dedicated supervising social worker can talk you through what to expect long before your first return is due, and we provide clear end-of-year statements and practical guidance so you feel confident rather than anxious. Fostering should be financially sustainable and free of unnecessary stress, so that you can focus your energy on what truly matters: giving a child a safe, stable and caring home.

Frequently asked questions

Do foster carers pay tax?

Foster carers are self-employed and must complete a tax return each year, but thanks to Qualifying Care Relief a large amount of fostering income is tax-free. In practice, many carers pay little or no tax on their fostering income at all.

Do I have to fill in a tax return as a foster carer?

Yes. You need to register with HMRC as self-employed and file a Self Assessment tax return each year, even in years where you work out that no tax is due. Registration is a one-off task, and the annual return quickly becomes routine.

What is Qualifying Care Relief?

It’s a special tax scheme for carers. For 2026/27 it gives you a fixed £20,440 per household, plus £435 per week for each child under 11 (or £515 for those aged 11 and over), all of which you can earn tax-free from fostering.

Do foster carers pay National Insurance?

Most self-employed carers no longer pay Class 2 National Insurance since April 2024. If your taxable profit is low, you can choose to make voluntary contributions to protect your State Pension, which many carers decide is worthwhile.