When fostering a child, foster carers receive many different forms of support to help them take care of the children to the best of their ability.
This includes financial support in the form of a fostering allowance that is paid weekly, and can vary according to different factors including the age and needs of the child, the number of children fostered, and the individual private fostering agency or local authority that the foster carer belongs to.
The purpose of a fostering allowance is to cover the costs of caring for foster children, from buying food and clothing to transporting them to school and entertaining them, and yes, the allowance is legally regarded as a form of income. When you register as a new foster carer you must also register with Her Majesty’s Revenue and Customs (HMRC) as ‘self-employed’, and start keeping records of the children you foster, their ages and the dates that you began and ceased looking after them.
You will also have to complete a Self Assessment tax return each year to declare all of your income from fostering allowance. All self-employed people are registered for Class 2 National Insurance contributions, but don’t worry, as foster carers receive a tax allowance and additional tax relief which can mean you pay little tax on your foster care payments, or even none at all. It’s also important to remember that foster care payments will also not affect any social security benefits you currently receive.