Do Foster Carers Need to File a Tax Return?

Fostering is a rewarding way to give children a safe, nurturing home while receiving support from the state and local authorities. Many people wonder whether the money they receive as a foster carer creates a tax obligation. This article explains the tax rules that apply to foster carers in the United Kingdom, focusing on London and its neighbouring boroughs of Southwark, Westminster and Camden.

What Fostering Is and Who It Helps

Fostering involves placing a child, teenager or young person in a temporary home where they receive care, guidance and protection. The child is usually looked after by a registered foster carer while their birth family or other relatives are unable to provide a suitable environment.

Foster care supports a wide range of children. Some are in need of a short-term placement during a crisis; others may require a longer-term arrangement until they can safely return to their family or find a permanent home. The aim is always to give the child a stable, loving environment that promotes their well‑being and development.

Benefits and Responsibilities of Foster Carers

Foster carers receive financial support that covers the cost of the child’s living expenses. The amount varies with the child’s age, health needs and the length of the placement. In addition to the allowance, carers may also receive extra payments for specific circumstances, such as caring for a child with a disability.

Carers are expected to provide a caring, safe and structured environment. They must meet the standards set by the local authority or the fostering agency, which includes attending training, meeting with a social worker, and keeping the child’s routine consistent. Foster carers also have a duty to act in the best interest of the child at all times.

Eligibility and Assessment Process

To become a foster carer you must meet the eligibility criteria set out by the local authority. These usually include being at least 18 years old, having a suitable home, and passing a background check that covers criminal records, child protection and health.

Assessment is a multi-stage process. Initially, you fill out an application form and provide references. If shortlisted, you will attend an interview and a home visit. The final stage involves a detailed assessment of your suitability to foster children with different needs.

For more information about the assessment timeline and how to prepare, see the Form F Assessment Timeline guide.

Support, Training and Supervision Provided

Once approved, foster carers receive ongoing training and supervision. This includes regular meetings with a social worker, access to specialist training for specific needs, and support from a network of fellow carers. Training covers child protection, health and safety, and how to manage challenging behaviour.

Supervision ensures that carers maintain the required standards and provides an opportunity to discuss any concerns. It also helps carers to develop their own skills and confidence in the role.

Allowances and Payment Structure Explained

According to official UK fostering guidance and local authority policies, foster carers receive a monthly allowance that is set according to the child’s age and needs. The payment schedule is usually a fixed amount for each placement and may be supplemented by additional payments for extra responsibilities.

Payments are made directly to the foster carer’s bank account and are subject to the same tax rules as any other income. However, the allowance is not considered taxable if it is paid in accordance with the statutory guidelines and the carer does not have any other taxable income from the same source.

Do Foster Carers Need to File a Tax Return?

When a Foster Carer Must Declare Income

Foster carers who receive an allowance that is not subject to tax are normally exempt from filing a tax return solely for that income. However, if the carer has additional sources of income—such as a part‑time job, rental income or dividends—they must declare all earnings on their annual self‑assessment tax return.

The key point is that the foster allowance itself is not taxable, but the total income you earn in a tax year may bring you above the threshold that requires a tax return. The threshold is set by HM Revenue & Customs and is reviewed annually.

Tax Relief and Exemptions for Foster Care

There are specific tax reliefs available to foster carers. For example, the Carer’s Allowance is a benefit for carers who spend at least 35 hours a week caring for a child. This benefit is not taxable and does not affect the foster allowance.

Carers may also claim tax relief on certain expenses related to the foster placement, such as travel costs to the child’s school or medical appointments. These expenses can be deducted from the taxable portion of your income.

Record Keeping for Tax Purposes

Keeping accurate records is essential. Carers should maintain a log of all payments received, including the date, amount and purpose. They should also keep receipts for any allowable expenses.

These records help you to complete a self‑assessment tax return accurately and to substantiate any claims for tax relief. If you are unsure how to keep records, many local authorities offer guidance and support.

How to Apply for Fostering in London

Applying for fostering in London follows the same basic steps as elsewhere in the UK. The process starts with an online application to the local authority or an independent fostering agency.

After submitting the application, you will be invited to an initial interview and a home visit. If you are successful, you will receive a formal offer of placement and the details of the training and support you will receive.

For a step‑by‑step guide, read the How to Become a Foster Carer in England article.

Local Fostering Context and Agencies Including Southwark, Westminster, Camden

London’s fostering landscape is diverse, with several local authorities and independent fostering agencies working to meet the demand for placements. In Southwark, the borough council provides a robust fostering programme with a focus on supporting children with complex needs. Westminster offers a mix of short‑term and long‑term placements, while Camden’s fostering service is known for its strong emphasis on training and supervision.

Independent fostering agencies in London often collaborate with local authorities to place children. They provide additional support and flexibility for carers who may prefer a more tailored approach. For a comparison of local authority and independent fostering agencies, see the Local Authority vs Independent Fostering Agency article.

Common Challenges and Realistic Expectations

Fostering is a demanding role. Carers may face emotional challenges when dealing with children who have experienced trauma or instability. It is important to recognise the limits of your capacity and to seek support when needed.

Financially, the allowance is designed to cover the child’s needs, but it may not fully cover all incidental costs. Carers should budget for additional expenses such as extra clothing, school supplies or medical treatments that are not covered by the allowance.

Another challenge is the time commitment. Foster carers often work long hours, especially when caring for children with complex needs. Balancing work, family and fostering responsibilities can be stressful, so many agencies provide respite care and support groups to help carers maintain their wellbeing.

Frequently Asked Questions

Do I have to pay tax on the foster allowance?

The foster allowance itself is not taxable if it is paid in accordance with statutory guidelines. However, if you earn additional income that brings your total earnings above the tax threshold, you will need to declare all income on a self‑assessment tax return.

Can I claim tax relief for foster carer expenses?

Yes. You can claim tax relief on certain allowable expenses, such as travel costs to the child’s school or medical appointments. Keep receipts and record all relevant expenses to support your claim.

What happens if I earn more than the tax threshold?

If your total income exceeds the threshold set by HM Revenue & Customs, you are required to file a self‑assessment tax return. The foster allowance remains exempt, but your other earnings will be taxed according to the usual rates.

Do foster carers receive any tax-free benefits?

Foster carers may be eligible for the Carer’s Allowance, which is a non‑taxable benefit for carers who spend at least 35 hours a week caring for a child. This benefit is separate from the foster allowance.

Can I file a tax return if I only receive the foster allowance?

If the foster allowance is your sole source of income and it is exempt from tax, you do not need to file a tax return. However, if you have any other taxable income, you must declare it on your return.