Foster Carer Tax: How Qualifying Care Relief Works in the UK

Foster carers usually pay little or no tax on their fostering income because Qualifying Care Relief allows a set amount to be treated as tax-free.

The amount of relief depends on your circumstances and the number of children in your care, and anything above the relief may be taxable.

The tricky part is working out how much of your fostering income is covered and what to do if you have other income alongside fostering. If you get the calculation wrong, you could end up paying more tax than necessary, or find yourself with an unexpected Self Assessment bill.

Here’s how Qualifying Care Relief works and how to calculate your foster carer tax.

Key points

• Only income above your qualifying amount is taxable 💷
  If your fostering receipts exceed your qualifying amount, you pay tax on the excess rather than your full fostering income. Your other income still matters because your Personal Allowance and Income Tax bands apply across your total taxable income.
• Qualifying Care Relief can affect your National Insurance record 🧾
  If the relief reduces your fostering profit below the relevant threshold, you may not be treated as having paid Class 2 National Insurance. You might be able to pay Class 2 voluntarily or apply for National Insurance credits as an approved foster carer to help protect your State Pension record.
• You still need to keep records and file correctly 📋
  Even if your taxable fostering profit is nil, you may still need to register for Self Assessment and report your fostering income. If you’re eligible, you can choose between the simplified method or the normal profit method, but the latter requires detailed records of your allowable expenses.
• ANNA simplifies your foster carer tax admin 🚀
  ANNA can track your fostering income, categorise expenses, capture receipts, provide real-time tax estimates, and support your Self Assessment filing. It helps you keep your tax admin organised throughout the year instead of scrambling at deadline time.

What is Qualifying Care Relief?

Foster carers are generally self employed for tax purposes, which means fostering payments count as business income in principle.

Working out your actual profit the normal way, by setting every expense against every pound received, would be unmanageable for most carers. That’s why HMRC offers a simplified method instead.

Qualifying Care Relief works by comparing your total fostering receipts with a qualifying amount made up of two parts:

• A fixed household amount
• A weekly amount for each child or young person placed with you

If your total receipts are below this combined amount, your taxable fostering profit is zero. If your receipts are higher, you only pay tax on the amount above the qualifying figure, not on everything you’ve received.

That makes the calculation much simpler, but you still need to work out the right qualifying amount for your circumstances. The rates change each tax year, and the calculation can also change if you started fostering partway through the year or cared for several children.

🧠 Good to know

A part-week placement still counts as a full week when calculating your weekly amount. So if a child arrives on a Thursday, you still get the full weekly allowance for that week.

Qualifying Care Relief rates for 2026/27

The fixed amount and weekly rates are set by law and increase each year in line with the Consumer Price Index.

For the tax year running from 6 April 2026 to 5 April 2027, the figures are:

These figures replace the 2025/26 amounts of £19,690, £415, and £495, so make sure you’re using the right year’s numbers when you calculate your return, particularly if you’re comparing your position against a previous year.

The fixed household amount is designed to cover the first part of your fostering receipts. You then add a weekly amount for each child or young person in your care. This gives you the qualifying amount, which you compare with your total fostering receipts.

If you became a foster carer partway through the tax year, the fixed household amount is reduced to cover only the period from when you started fostering. This ensures the fixed amount stays proportionate to the time spent fostering.

Working out your qualifying amount

Once you have the correct figures for the year, the calculation is straightforward.

Start with the fixed household amount, then add the relevant weekly amount for each child or young person, multiplied by the number of weeks they were placed with you during the tax year.

If you cared for more than one child, you calculate the weekly amount separately for each placement and add the totals together.

For example, say you fostered one child aged eight for the full 2026/27 tax year. Your qualifying amount would be:

£20,440 + (52 × £435) = £43,060

If your total fostering income for the year was £40,000, it would fall below your £43,060 qualifying amount. Your taxable fostering profit would therefore be £0.

If you received £45,000 instead, the calculation would be:

£45,000 - £43,060 = £1,940 taxable fostering profit

That £1,940 figure isn’t necessarily the amount you’ll pay tax on.

If fostering is your only income, your Personal Allowance (£12,570 for most people) still applies on top of the qualifying amount, so a profit this size would typically be covered, and no tax would be due.

Tax only starts to bite once your total taxable income from all sources exceeds your Personal Allowance.

The same principle applies when you have multiple placements, although the calculation becomes more complicated because you need to account for the age of each child and how long each placement lasted.

💡 Did you know?

Once you know your qualifying amount, comparing it against your actual receipts is much easier if your fostering payments are already logged and totalled.

ANNA’s Auto Accountant keeps a running record of what’s coming in, so you can see where you stand without adding up bank statements and payslips by hand.

An alternative method

If your fostering receipts are more than your qualifying amount, you can use the normal profit method instead. This means calculating your actual fostering profit by deducting allowable business expenses from your fostering receipts.

If your receipts are below your qualifying amount, the relief applies automatically, and this choice isn’t available.

The normal method may be suitable if your allowable expenses exceed the amount covered by Qualifying Care Relief. However, you’ll need to keep detailed records of your income and the expenses you claim.

The normal method applies by default for any year you don’t elect the simplified method, and each election covers only the year you make it.

However, chopping and changing between methods in different tax years can affect what you’re able to claim, for example around capital allowances. That’s why it’s important to think through which method fits your situation before you commit, ideally with an accountant if your finances aren’t straightforward.

National Insurance and your State Pension

Qualifying Care Relief affects more than Income Tax. Where the relief brings your taxable fostering profit to nil, you also won’t pay Class 4 National Insurance on it.

These entitlements are linked to your National Insurance record. If your fostering profits are below the small profits threshold, which may happen once you apply Qualifying Care Relief, you won’t be treated as having paid Class 2 National Insurance.

You have two options here:

• Pay Class 2 voluntarily: There’s a box for this on your Self Assessment return, and it’s a small weekly amount collected along with your tax bill.
• Apply for National Insurance credits as an approved foster carer: These count towards your State Pension only (not the other contributory benefits). You apply after the end of each tax year, and you’ll usually need a supporting letter from your fostering service.

Qualifying care receipts: what counts?

Before you can compare your income with your qualifying amount, you need to know what counts as a fostering receipt.

Your qualifying care receipts include payments you receive from a local authority, an independent fostering provider, a Health and Social Care Trust in Northern Ireland, or a Shared Lives scheme for providing qualifying care.

These payments can have several elements. For example, you might receive an allowance intended to cover the child’s costs as well as a fee that recognises your time, skills, and responsibilities as a carer. Both can count towards your qualifying care receipts.

The relief may also cover kinship care, Staying Put arrangements after a young person turns 18, parent and child placements, and supported lodgings where the arrangement is providing care, not just renting out a room.

Sharing the allowance between two carers

If you and a partner are both approved foster carers and live in the same household, you don’t each receive a separate full fixed household amount. You share the £20,440.

It’s split equally, so with two carers, you’ll each have £10,220 before adding your weekly amounts.

You can also allocate the weekly amounts to reflect how you share the qualifying care receipts. If you’re completing separate tax returns, make sure each one matches the split you’ve agreed.

Filing your foster carer tax return

Even if Qualifying Care Relief reduces your taxable fostering profit to nil, you may still need to register for Self Assessment and file a tax return if you’re fostering on a commercial basis.

Did you know?

You need to register by 5 October following the end of the tax year in which you started fostering. If you miss this, or file late once you’re registered, HMRC can charge penalties starting at £100, even if no tax is owed.

When you file, you’ll report your fostering income through the self employment section of your return. If you’re using the simplified method, SA103S is the relevant supplementary page. If you’ve chosen to calculate your actual profit using allowable expenses, you may need SA103F instead.

Your Self Assessment return may also need to include other income, such as employment income, pensions, savings, or rental income.

For the 2026/27 tax year, the online Self Assessment filing and payment deadline is 31 January 2028.

If your fostering profit is high enough that you end up owing more than £1,000 in tax for the year, HMRC will typically ask for payments on account towards the following year’s bill, split across your January and July deadlines.

💡 Did you know?

ANNA can help you stay on top of your Self Assessment tax return without the usual paperwork. Track your fostering income and expenses throughout the year, get real-time tax estimates, and use ANNA’s tax filing support to submit your return to HMRC.

How ANNA helps with foster carer tax admin

Keeping track of fostering payments, expenses, and tax deadlines can be difficult, especially when you have other income to report.

ANNA brings your business finances and tax admin together in one place, helping you stay organised year-round.

Here’s what you can do with ANNA:

• Track your fostering income: Keep payments organised as they come in, so you have a clear record when it’s time to calculate your taxable profit
• Automate your bookkeeping: Let ANNA categorise income and expenses automatically, and reduce manual bookkeeping
• Capture receipts: Photograph and store receipts as you receive them, so you don’t have to search through paperwork when preparing your tax return
• Track business expenses: Keep your fostering-related expenses organised, categorised, and up to date
• Estimate your tax: Get real-time tax estimates based on your financial information to avoid surprises when your Self Assessment bill is due
• File your Self Assessment: Get support with preparing and filing your tax return with HMRC, regardless of the income you need to report
• Create and track invoices: Create invoices and keep track of payments in one place if you have other self employed income alongside fostering
• Use a dedicated business account: Keep your business finances separate and make it easier to track income and expenses
• Set aside money for tax: Use Smart Pots to set aside money for upcoming tax bills and other expenses
• Stay on top of deadlines: Get smart reminders for important tax and business deadlines to avoid missing key dates
• Get 24/7 support: Chat with ANNA’s UK-based support team whenever you need help with your account, bookkeeping, or tax admin

Open an ANNA account today and simplify your foster carer tax admin.