Your fostering service calls it an “allowance”. HMRC calls it self-employed income. That mismatch is why so many carers ask whether the fostering allowance taxable, and why some never register with HMRC because they assume it can’t be. This guide explains how the tax rules treat each type of fostering payment, when tax can become due, and what you still need to do even when the answer is “no tax”.
Fostering payments count as self-employed income, but qualifying care relief usually means no tax is due on them. In 2026/27 each household can receive £20,440, plus £435 a week for each child under 11 and £515 for each child aged 11 or over, before any tax applies. Even when the relief brings your fostering profit down to nil, you’d normally register as self-employed when you begin fostering and send HMRC a Self Assessment return each year.
- Fostering income is treated as trading income, but qualifying care relief removes most or all of it from tax.
- The 2026/27 limit is a £20,440 fixed amount per household plus a weekly amount for each child placed.
- Tax only becomes possible once receipts pass that limit, and the taxable figure then depends on which of two calculation methods you use.
- Income from a job, pension, savings or property is taxed as normal. The relief doesn’t cover it.
- Private fostering arrangements, made without a local authority, don’t get the relief.
Is Fostering Allowance Taxable? The Short Answer
In tax law, the money you receive for looking after a child in foster care is treated as income from self-employment. It doesn’t matter that your provider pays it as an allowance, a fee, or both. So strictly, your fostering allowance is taxable income.
In practice, a special scheme called qualifying care relief means most foster carers pay nothing. The relief sets a limit, called the qualifying amount. If your total fostering receipts for the year are at or below it, your fostering profit is treated as nil. You pay no Income Tax and no Class 4 National Insurance on that income.
| Term you’ll hear | What it actually means |
|---|---|
| Fostering allowance | The money your provider pays to cover the cost of caring for a child |
| Fee or reward payment | Extra payment for your time and skills, on top of the allowance |
| Fostering receipts | Everything you’re paid for the placement, added together |
| Qualifying care relief | HMRC’s relief that lets receipts up to a limit go untaxed |
| Qualifying amount | The limit itself: a fixed amount plus weekly amounts per child |
So the honest answer to “is my fostering allowance taxable?” is: it counts as income, but for most households it never reaches the point where tax is due.
The 2026/27 Qualifying Amount
According to GOV.UK’s guidance for foster carers, the qualifying amount has two parts. You add the fixed amount for your household to a weekly amount for every week, or part week, that each child lives with you.
| Part of the limit | 2026/27 | 2025/26 |
|---|---|---|
| Fixed amount per household | £20,440 | £19,690 |
| Weekly amount, child under 11 | £435 | £415 |
| Weekly amount, child aged 11 or over | £515 | £495 |
According to LITRG, weeks run from Monday to Sunday, and a child who arrives on a Thursday still earns you the full weekly amount for that week. The £515 rate starts in the week that contains the child’s 11th birthday, not the week after.
Many websites still quote £10,000 a year plus £200 or £250 a week. Those rates applied until 2022/23. The government raised them from 2023/24, and they now rise each year in line with inflation. If a page uses the old figures, its examples will understate how much you can receive tax-free.
Two carers in one household
The fixed amount belongs to the household rather than to any one person, so it may have to be divided. HMRC’s guidance says that where a household has more than one carer, the fixed amount is split by the number of carers. With two carers, that would be £10,220 each. It isn’t safe to assume that whoever receives the payments can use the whole £20,440. Check how your fostering service records each carer and how the income will be reported before you fill in a return.
The weekly amounts are different. They’re worked out for each child or adult you look after and go to the carer who provides that care.
When placements change during the year
Placements rarely run neatly from April to April, so the qualifying amount grows with each week a child is actually with you. GOV.UK gives the example of a carer who looks after a 14-year-old all year and an 8-year-old for 10 weeks:
- Fixed amount: £20,440
- 14-year-old: £515 × 52 weeks = £26,780
- 8-year-old: £435 × 10 weeks = £4,350
- Total qualifying amount: £51,570
If that household’s fostering receipts were £51,570 or less, none of it would be taxed. So when someone asks whether a fostering allowance is taxable, the honest reply is that it depends on the weeks and ages of the children placed, not just the amount paid.
Which Fostering Payments Are Taxable?
This is the question most guides skip. The table shows how common payments are usually treated. “Counted” means the payment is added to your fostering receipts, which are then compared with the qualifying amount.
| Payment | How it’s usually treated | Notes |
|---|---|---|
| Weekly fostering allowance | Counted, then covered by the relief up to the limit | The main part of most carers’ income |
| Fee, reward or skills payment | Counted in the same way | Higher payments for specialist placements can take you closer to the limit |
| Holiday, birthday and festival payments | Counted if your provider pays them for the placement | Add them to your yearly total |
| Mileage or travel paid by your provider | Counted if paid as part of your fostering payments | Check how your provider describes it |
| Retainer between placements | Counted | No weekly amount builds up while no child is placed, so only the fixed amount covers it |
| Payments from private fostering | Taxed under the normal rules | No qualifying care relief; may be trading profit or, for occasional care, miscellaneous income |
| Wages from another job | Taxable through PAYE | Separate from fostering |
| Pension, savings, rent or dividends | Taxable as normal | The relief only covers caring income |
Watch retainers in particular: a long gap between placements adds receipts without adding any weekly relief.
Which Arrangements Qualify?
The relief covers care arranged through official channels. LITRG’s foster carer guidance sets out the main cases:
| Arrangement | Qualifies for relief? |
|---|---|
| Child placed by a local authority | Yes |
| Placement through an independent fostering agency | Yes |
| Kinship care where the child is in local authority care | Yes |
| Informal family arrangement with no local authority involvement | No |
| Staying put (young person aged 18 to 21 staying on) | Yes |
| Parent and child placement | Yes, if HMRC’s conditions are met: the parent is 18 or over and the baby isn’t a looked-after child |
| Shared Lives / adult placement care | Yes, usually for up to three people at once (brothers and sisters count as one). This cap is for Shared Lives only, not foster care |
| Private fostering arranged directly with parents | No: declared under the normal tax rules |
The relief also doesn’t apply to someone who was a parent of the child, or had parental responsibility, before the child came into care.
Private fostering needs a little more care. Because no local authority or agency is involved, the payments have to be declared under the ordinary tax rules. A regular arrangement will usually be a trade, so profit is the income less allowable costs. Where care is only occasional, such as the odd spell of respite, HMRC may treat it as miscellaneous income instead. In either case, costs can be deducted where the relevant rules allow it.
What Happens If You Go Over the Limit
Going over the qualifying amount doesn’t mean the whole excess is automatically taxed. You usually get to pick between two calculations and use whichever suits you:
- Simplified method: take your qualifying amount away from your total care receipts. You can’t also deduct expenses or capital allowances.
- Profit method (sometimes called the normal method): take your allowable expenses and capital allowances away from your receipts. Qualifying care relief isn’t claimed as well.
Work out both before deciding. Which gives the lower profit depends entirely on your own receipts and costs.
| Simplified method | Profit method | |
|---|---|---|
| How profit is worked out | Receipts minus the qualifying amount | Receipts minus allowable expenses and capital allowances |
| Records of expenses needed? | No | Yes, kept carefully |
| Suits you when | Your real costs are lower than the qualifying amount | Your real costs are higher than the qualifying amount |
| How you choose it | Filing your return on time counts as the election | Used if you don’t elect for the simplified method |
The choice is made separately for each tax year. LITRG explains that the deadline for the election is 12 months after the Self Assessment filing date.
A carer looks after two children aged 12 and 14 for the whole of 2026/27 and receives £80,000 in total.
- Qualifying amount: £20,440 + (2 × 52 × £515) = £74,000
- Simplified method: £80,000 − £74,000 = £6,000 taxable profit
- Profit method with £60,000 of allowable expenses and capital allowances: £80,000 − £60,000 = £20,000 profit
The simplified method gives the lower profit here. If the carer has no other income, the £6,000 sits within the £12,570 Personal Allowance, so there’s still no Income Tax to pay.
Other Income Is Still Taxed Normally
Qualifying care relief only covers what you’re paid for caring. GOV.UK is clear that income from a job or investments is still taxed. This catches people out when they assume the whole household is “tax-free”.
- Fostering: one child aged 8 placed all year, receipts £18,000. Qualifying amount £20,440 + (52 × £435) = £43,060, so fostering profit is nil.
- Part-time job: £18,000 salary, taxed through PAYE.
- Income Tax on the job: (£18,000 − £12,570) × 20% = £1,086, collected by the employer.
The fostering income doesn’t add to the tax on the job, because the relief brings it down to nil. Rates are from GOV.UK’s Income Tax rates page for England, Wales and Northern Ireland.
Do You Still Need to File a Tax Return?
Yes, in almost every case. GOV.UK says foster carers should register as self-employed when they start fostering and file tax returns. Register for Self Assessment by 5 October after the end of your first tax year as a carer.
- Register as self-employed, and you’ll get a Unique Taxpayer Reference.
- Keep a simple log of each child’s start and end dates, their age band, and every payment you receive.
- Work out your qualifying amount each year using the fixed and weekly amounts.
- Use the right self-employment pages. With the simplified method, you show your care receipts and claim qualifying care relief on the short pages. With the profit method, you use the full pages to show receipts and allowable expenses, and you don’t claim the relief on top. HMRC’s HS236 helpsheet explains what goes where.
- File on time: 31 October for paper returns, or 31 January for online returns. See our tax return deadline guide.
While you’re using qualifying care relief, separate expenses and capital allowances can’t be claimed, and HMRC accepts simple business records. It’s still sensible to keep a note of payments, placement dates, children’s ages and what you spend on care. If your receipts rise above the limit in a later year, those records let you compare the simplified and profit methods properly. Our guide to self-employed business expenses explains what counts.
Scotland, Wales and Northern Ireland
Qualifying care relief works the same way across the UK, using the same fixed and weekly amounts. In Northern Ireland, placements made through a Health and Social Care Trust qualify in the same way as local authority placements. What differs is the tax on your other income: Scottish taxpayers pay Scottish Income Tax rates on wages, pensions and any taxable fostering profit above the limit.
National Insurance, State Pension and Making Tax Digital
- Class 4 National Insurance: when the relief brings your caring profit to nil, no Class 4 is due on it.
- Class 2 National Insurance: compulsory payments stopped from 6 April 2024. Self-employed carers whose profits reach the relevant threshold are treated as having paid Class 2. Below that threshold, you may be able to pay voluntarily.
- Class 3 credits: if you’re not treated as paying Class 2 and don’t pay voluntarily, you may qualify for National Insurance credits while you care. They help protect your State Pension record, so check your eligibility with HMRC.
- Making Tax Digital for Income Tax: HMRC says people who receive qualifying care receipts don’t have to use MTD for the 2026/27 tax year. Check the rules again for later years rather than assuming the exemption carries on. Our guide to Making Tax Digital exemptions covers this.
Fostering Payments and Benefits
Tax and benefits run on separate rules, so qualifying care relief doesn’t decide what happens to your benefits.
- Universal Credit: fostering payments are generally ignored when your award is worked out. You still need to tell the Department for Work and Pensions that you foster and report the payments.
- Child element: you can’t normally get the Universal Credit child element for a child you foster.
- Housing costs: foster carers may be allowed an extra bedroom under the housing-cost rules.
- Child Benefit: this isn’t usually paid for a child placed with you by a local authority.
- Other benefits: each has its own conditions, so check with whoever pays it.
GOV.UK’s help and support for foster carers pages have more detail, and your fostering service can also help.
Common Mistakes
| Mistake | Why it causes problems |
|---|---|
| Not registering because “it’s tax-free” | You can face penalties for not registering or not filing, even with no tax due |
| Using old figures (£10,000 / £200 / £250) | You’ll think you’re closer to the limit than you are |
| Claiming expenses while under the limit | Expenses can’t be claimed when receipts are within the qualifying amount |
| Forgetting a second job or pension | That income is taxed as normal |
| Assuming private fostering qualifies | Private arrangements are declared under the normal tax rules |
| Not sharing the fixed amount | With more than one carer, the £20,440 is divided between them |
| Not counting retainer weeks | They add receipts without adding weekly relief |
Fostering Allowance Taxable: FAQs
Is my fostering allowance taxable?
It counts as self-employed income, but qualifying care relief usually means no tax is due. In 2026/27 you can receive £20,440 per household plus £435 or £515 a week per child before tax applies.
Do foster carers pay tax in the UK?
Most don’t pay tax on their fostering income, because it stays within the qualifying amount. They pay tax as normal on other income, such as wages or a pension.
Is foster care income taxable if I also work?
Your job is taxed as usual through PAYE. Your fostering receipts get their own relief, so if they’re under the limit they don’t add to your tax bill.
Do I need to register as self-employed?
Yes. GOV.UK says foster carers should register as self-employed when they start fostering and file a Self Assessment return each year.
Can foster carers claim expenses?
Only if receipts are above the qualifying amount and you choose the profit method. While you use qualifying care relief, expenses and capital allowances can’t be claimed.
Is a retainer payment taxable?
A retainer counts as fostering income. With no child placed, no weekly amount builds up, so only the fixed amount covers it.
Does qualifying care relief apply to kinship carers?
Yes, where the child is in local authority care and placed with you. Informal family arrangements don’t qualify.
Is private fostering income taxable?
Yes. Qualifying care relief doesn’t apply, so the payments are declared under the normal rules, usually as trading profit and occasionally as miscellaneous income.
Final Verdict: Is the Fostering Allowance Taxable for You?
For most carers, the fostering allowance is taxable in name only. It counts as self-employed income, but qualifying care relief usually brings the taxable profit to nil. Tax becomes possible only when receipts pass the qualifying amount, when you have other income, or when the arrangement is private rather than through a local authority or agency.
If you’re still unsure whether your fostering allowance is taxable after a change, for example a new placement or a pay rise from your provider, recheck the qualifying amount for that year. Register, keep a weekly log, and file each year, and you’ll stay on the right side of HMRC. For a fuller look at how the relief is calculated, Eternity Accountants has a detailed guide to the foster carers tax allowance.
- Add up everything your provider paid you this tax year.
- Work out your qualifying amount from the fixed amount and each child’s weeks.
- If you haven’t already, register as self-employed.
- Read HMRC’s HS236 helpsheet before completing your return.
- The 2026/27 figures come from GOV.UK’s foster carer tax guidance.
- The rules on weeks, sharing, private fostering and the election come from LITRG, checked November 2026.
- The examples are illustrative and were calculated with 2026/27 figures.
- Last reviewed: November 2026.
- GOV.UK – Help and support for foster carers in England: tax arrangements
- GOV.UK – HS236 Qualifying care relief (2026): methods and reporting
- GOV.UK – Qualifying care relief increase
- LITRG – Qualifying care relief
- LITRG – Qualifying care relief: foster carers
- GOV.UK – Register for Self Assessment
- GOV.UK – National Insurance credits
- GOV.UK – Income Tax rates and Personal Allowances