- Foster carers are treated as self-employed for tax purposes
- HMRC's Qualifying Care Relief (QCR) gives foster carers a generous tax-free threshold
- Most foster carers pay no income tax at all
- You must register with HMRC and submit a Self Assessment tax return each year — even if you owe nothing
- Fostering income does not affect your right to Universal Credit or Child Benefit
How HMRC Treats Foster Carers
Foster carers are classified by HMRC as self-employed. This means your fostering income is not taxed through PAYE — instead, you declare it annually via a Self Assessment tax return. However, HMRC has a specific, very generous relief scheme for foster carers that means most pay little or no income tax.
Qualifying Care Relief (QCR) Explained
Qualifying Care Relief gives every foster carer a personal tax-free limit each year that is split into two components:
Component 1 — Fixed Annual Relief
A fixed £18,140 per year (2025/26) that every foster carer receives regardless of how many children they care for.
Component 2 — Per-Child Weekly Relief
An additional weekly relief for each week (or part week) a child is in your care:
- Children under 11: £375 per child per week
- Children 11 and over: £450 per child per week
Your total tax-free threshold = £18,140 + (per-child weekly amounts × weeks in care). For most foster carers, this exceeds their total annual fostering income — meaning they pay zero income tax.
A Real Example
Sarah is an IFA foster carer. In 2025/26 she cares for one teenager (age 14) for the full 52 weeks and earns £500/week (allowance + fee) = £26,000 total income.
Her QCR threshold:
- Fixed element: £18,140
- Per-child element: £450 × 52 weeks = £23,400
- Total tax-free threshold: £41,540
Her income (£26,000) is well below her threshold (£41,540). She pays zero income tax on her fostering income.
What About National Insurance?
Foster carers are treated as self-employed but most will pay no National Insurance contributions on fostering income, because:
- Class 2 NIC kicks in only when profit exceeds the Small Profits Threshold (£6,725 in 2025/26)
- Under QCR, most foster carers have zero "profit" — so no NIC liability
- You can apply for a NIC credit to maintain your State Pension record even if you pay no contributions — this is an important step, ensure you do this
Do I Still Need to Register with HMRC?
Yes — this is the most commonly missed step. Even if you will owe nothing, you must:
- Register as self-employed with HMRC within 3 months of starting fostering
- Submit a Self Assessment tax return every year (deadline: 31 January online)
- Declare your fostering income and apply QCR on your return
Failure to register can result in HMRC penalties — even if you have no tax to pay. Register at gov.uk →
Does Fostering Income Affect Universal Credit?
This is a very common worry — and the answer is nuanced. Your fostering income will be taken into account in your Universal Credit calculation, because UC is based on total household income. However, the allowance portion (covering the child's actual costs) may be treated differently to the professional fee element. Speak to Citizens Advice or a benefits specialist to understand the exact impact for your situation — it varies.
Importantly, Child Benefit for your own children is not affected by fostering income.
Does the Foster Child Affect My Tax Credits?
Looked-after children are not counted as part of your family for Tax Credit or Universal Credit purposes. This means you cannot claim Child Tax Credit for a foster child, but equally, their presence doesn't count against the two-child limit for UC.
Getting Help
- HMRC helpline: 0300 200 3300
- The Fostering Network: has a QCR guide for members
- Fosterline: 0800 040 7675 — free advice service
- Many accountants specialise in foster carer tax returns — your agency may have a recommended provider