Thinking about fostering and trying to decode the money side? You’ll see two terms everywhere: allowance and fee. They sound similar, but they’re not the same—and understanding the difference will help you compare local authorities (LAs) and independent fostering agencies (IFAs), plan your household budget, and ask the right questions before you apply or transfer.
Below is a clear, UK-focused guide on what you’re guaranteed, what varies by skills/experience, and how tax relief works so you keep more of what you earn.
At a glance
- Allowances are there to cover the child’s day-to-day costs (food, clothing, utilities, transport, activities, etc.). In England there’s a National Minimum Allowance (NMA) that fostering services must at least meet; similar national frameworks or recommended rates exist in Wales, Scotland and Northern Ireland. These usually rise each April.
- Fees (sometimes called “reward” or “skill payments”) are paid to you as the carer for your time, skills and responsibility. They’re not guaranteed nationwide and vary widely by service, experience, qualification and placement type.
- Extras (e.g., birthdays/holidays, mileage, equipment, retainers during gaps, or specialist supplements) are set locally and differ between fostering services.
- Tax: the UK’s Qualifying Care Relief (QCR) gives most carers a large tax-free threshold, covering many payments from the fostering service.
What is a fostering allowance?
The allowance is the baseline payment linked to each child in placement. It’s intended to fully cover the child’s everyday needs—things like meals, clothing, school costs, transport to contact, pocket money, hobbies and a contribution to household bills. That’s why it’s paid per child, per week, and varies by age band. The government explains it this way because the allowance is designed for the child’s costs rather than as a wage for the carer.
What the allowance must cover
Typical spend categories include: food and packed lunches; clothing and shoes; toiletries; school trips and equipment; mobile top-ups (if agreed); activities and clubs; and increased utilities. Services often provide guidance on expected spends (e.g., pocket money bands by age) so carers can evidence that the allowance is being used appropriately.
National minimums—and yearly uplifts
- England: The Department for Education sets a National Minimum Allowance (NMA). For 2025/26 the UK Government announced a 3.55% uplift to those minimum rates. Local authorities/IFAs must pay at least the NMA and many pay more.
- Wales: A national minimum allowance applies and was increased by 2.6% for 2025/26.
- Scotland: A Scottish Recommended Allowance (SRA) was introduced so all eligible foster/kinship carers receive a standard national allowance, with implementation monitored.
- Northern Ireland: The Department of Health publishes the annual foster care allowance scale (age-banded weekly rates).
Key point: the allowance is the guaranteed foundation—paid while a child is with you—whereas fees depend on the fostering service’s scheme and your role.
What are fostering fees?
Fees are the part of the package that recognises your skill level, training, hours and responsibility. Think of fees as the “professional element”. They’re not set nationally and can vary a lot based on:
- Your experience and training (e.g., completion of “Skills to Foster”, therapeutic training).
- The type of placement (e.g., complex needs, parent & child, remand, UASC).
- Whether you’re with a local authority or an independent fostering agency. Many IFAs advertise higher weekly fee packages because they commission placements from LAs and include enhanced support. Some publish typical figures (e.g., total packages often quoted in the £350–£450+ per week range), though the exact split between allowance and fee differs by agency. Always compare like-for-like.
Skill-level schemes
Most services operate tiered “skill levels” (or “bands”). As you complete training, gain experience and evidence competencies, you move up a level and your fee increases. Some services also pay specialist fees for therapeutic fostering or complex medical needs. For example, one council publicly lists a complex medical needs fee level alongside the allowance.
Retainers and out-of-placement scenarios
A few services pay retainers between placements (often a percentage of the usual package) if you remain available and engaged in training. Others only pay retainers in specific circumstances (e.g., a child attending residential education temporarily). Policies vary—one example describes a 50% retainer of both allowance and fee when the child is away from home but contact is maintained. Always check the small print.
Allowances vs Fees: what’s actually guaranteed?
Guaranteed (baseline):
- Allowance at or above the national minimum for your country—paid per child, per week while in placement. Services must meet this baseline and usually publish their annual tables.
- Additional child-related allowances that many councils include, such as birthday, festival and holiday payments. These are commonly defined as a multiple of the weekly allowance (e.g., two weeks’ allowance as a holiday payment in some areas). These extras are typically tied to the child, not to carer skill.
Variable (skill-based or policy-based):
- Fee (reward) payments linked to your level, training and the complexity of placements.
- Specialist supplements (therapeutic, parent-and-child, step-down from residential, complex medical needs).
- Retainers, bonuses, refer-a-friend incentives, home-preparation/equipment grants, and mileage rates beyond a standard policy—these are service-specific.
Bottom line: the allowance is the child’s money and has a national floor; fees are the carer’s money and depend on your agency/council scheme and role.
How to read a payments policy (without the headache)
When you compare services, ask for the fees & allowances policy and look for:
- Weekly table that separates allowance (by age band) from fee (by skill level). If the document rolls them into one “headline” figure, ask for the breakdown. Many councils publish two columns (e.g., “Weekly Allowance” vs “Weekly Fee”).
- Extras:
- Birthdays/holidays/festivals – amounts and when they’re paid (some pay holidays in July as two weeks’ allowance; fee component is often excluded).
- Mileage – rate per mile and what journeys are reimbursable (school, contact, activities).
- Clothing/settling-in – is there an initial clothing or equipment allowance for new placements?
- Specialist payments – clear criteria for therapeutic, complex needs or parent-and-child. Example policies openly list specialist fee levels.
- Retainers/gaps – whether there’s any payment between placements and what conditions apply (availability, training attendance, evidence of searches).
- Review dates – do rates uplift each April in line with national announcements, and how are carers notified of changes? (England’s NMA and devolved-nation updates usually publish annually.)
The tax side: Qualifying Care Relief (QCR)
Money you receive from the fostering service—allowances, fees, birthday/holiday payments, mileage reimbursements—is considered fostering income for tax purposes. But the UK’s Qualifying Care Relief gives carers a generous tax-free threshold made up of a household “basic” amount plus a per-child, per-week amount. Many carers find their fostering income falls below this threshold, meaning they owe no income tax on it. You still complete a Self Assessment each year to check.
Why this matters for “allowances vs fees”: although allowances are for the child and fees are for your skills, both normally count within QCR’s total when you do your Self Assessment. Keeping simple weekly records (who was placed, their age, dates) makes the calculation straightforward. Several fostering services and charities provide calculators and examples based on the current QCR figures.
LA vs IFA: does one pay “better”?
There isn’t a universal answer, but some patterns are common:
- Local authorities: Often solid on allowance and transparent on policy extras; fees may start lower but can step up with skills and years of service.
- IFAs: Frequently advertise higher weekly packages to attract experienced carers, particularly for complex or hard-to-match placements—hence the larger fee component. Always compare support, training, 24/7 on-call, therapy access, respite, and mileage rules, not just the headline pounds.
A smart way to compare is to price a like-for-like scenario (e.g., one teen for 12 weeks, two siblings for a full term) and include all extras you’re likely to claim. If possible, ask each service for an illustrative annual statement showing how they expect payments to look.
Common questions carers ask
“If the allowance covers the child’s costs, can I use it for bills?”
Yes—utilities, food, transport and broadband are legitimate because they’re part of caring for the child. Services usually set expectations around pocket money, savings, clothing and birthdays/Christmas/religious festivals so spending is fair and consistent.
“Do I still get paid if a child goes on holiday with birth family or to residential for a week?”
It depends on your service. Some policies pay a percentage retainer if you remain available and maintain contact; others don’t. Read the retainer rules carefully and ask for examples in writing.
“Are there set national figures for fees?”
No. Fees are service-specific. Two neighbouring councils might differ, and IFAs vary even more. That’s why checking the fee ladder (skill bands) and specialist supplements is essential.
“How often do allowance rates change?”
Typically annually in April, in line with national announcements or local decisions. For 2025/26, England increased NMA by 3.55%; Wales by 2.6%; Scotland and Northern Ireland set/update their own frameworks.
A quick checklist before you choose or transfer
- Separate totals: Ask for the allowance (by age) and fee (by skill) shown separately.
- Extras confirmed: Get birthday/holiday amounts, clothing/equipment help, and mileage policy in writing (some pay holiday as multiples of the allowance but exclude the fee).
- Specialist rates: If you’re open to therapeutic, parent & child, or complex medical placements, ask for the exact supplements and the training included.
- Retainers & breaks: Clarify payment between placements, during residential education or hospital stays, and how respite is handled.
- Tax support: Confirm they provide year-end statements and signpost QCR resources so Self Assessment is easy.
The takeaway
- Allowances = guaranteed, child-centred money with a national floor (NMA/SRA/NI/Wales frameworks) that services must at least meet. Expect annual uplifts and clear guidance on what the allowance covers.
- Fees = variable, carer-centred money that recognises skills and placement complexity. These differ by service and increase with experience, training, and specialist roles.
- Extras = policy-based top-ups (holidays, birthdays, mileage, retainers) that can materially change your real weekly income—so read the local policy, not just the advert.
- Tax relief (QCR) = a major benefit that leaves many carers with little or no income tax to pay on fostering payments—make sure you understand it.
If you’d like, I can turn this into a downloadable checklist and a comparison worksheet you can use with any LA or IFA—just say the word, and I’ll generate it for you.