To foster a child is different than to adopt a child; the child will stay with the foster family for a duration of time as required, and while the foster family may be responsible for the child’s well-being while they are within their home, the legal rights of the child are still with the birth parents. There will often be a plan for the child’s future and for the child to return to its birth family but sometimes fostering can lead to adoption.
There are several different types of foster care:
• Emergency – a child will need care for a few nights.
• Short-Term – The care for a child will be a few weeks or a few months.
• Short Breaks – A short time; a few nights or a few weeks, to give the family or carers of the child a break, particularly if the child has behavioural difficulties or special needs.
• Remand – by court order to be with a specifically trained foster family.
• Long-Term – Foster care to be provided for a few years. This is common with children who do not want to be adopted.
• Family/Friends/Kinship – In these cases, the child will be fostered by someone that they know.A foster carer will be classed as a self-employed person which means a foster carer can make national insurance payments towards the state pension. The allowance income received from the foster care agency will need to be declared on a self-assessment tax return. The foster care agency will pay either a week or monthly payment to the foster carer to contribute to the care of the fostered child. England, Wales and Northern Ireland all have a minimum weekly allowance to be paid to them for each child. Scotland currently does not have a minimum allowance. The minimum allowances for England outside of London are as follows:
• Baby - £129 per week
• Pre-primary - £132 per week
• Primary - £146 per week
• 11-15 year old - £167 per week
• 16 – 17 year old - £194 per week
The fostering agency may choose to make additional payments for summer holidays, Christmas and birthdays.
The foster carer will be tax exempt on £10,000 of the allowance payments, and a further amount for each week they care for a child. If the child is under 11, they will have £200 per week of caring for the child free from tax, and this rises to £250 if the child is over 11. If there are multiple children in the fosterer’s care, they can apply the weekly exemption for each child. Example:
12 year old, cared for 4 weeks: £250 x 4 = £1,000
9 year old, cared for 48 weeks: £200 x 48 = £9,600
£10,000 + £1,000 + £9,600 = £20,600 amount of weekly allowances free from tax. This amount can be added to the self-assessment tax return as an expense which will then show the remainder of the allowances on which tax is due.Tags:
personal tax, self assessment tax return, foster care, tax