Fostering is incredibly rewarding, but it can also bring questions about tax and Self Assessment.
If you are a foster carer, it is important to understand how your fostering income is treated for tax purposes and whether Qualifying Care Relief can apply to you.
With the deadline for online Self Assessment returns for the 2025/26 tax year approaching on 31 January 2027, now is a good time to make sure your records are in order.
What is Qualifying Care Relief?
HMRC provides a special tax relief for qualifying foster carers and certain other carers.
Rather than taxing your fostering payments in the same way as ordinary self-employed income, Qualifying Care Relief gives you a tax-free amount based on:
- A fixed amount for your household
- An additional weekly amount for each child or adult in your care
For the 2025/26 tax year, the qualifying amount is made up of:
£19,360 fixed amount for the household, plus:
- £405 per week for each child under 11
- £485 per week for each child aged 11 or over
- £485 per week for each qualifying adult
If there is more than one carer in the same household, the fixed amount is shared between the carers.
What does this mean for your tax return?
If your total qualifying care payments are less than your qualifying amount, HMRC treats you as making no profit or loss from your qualifying care activities.
This means you will not pay Income Tax or Class 4 National Insurance on that caring income.
However, you may still need to complete a Self Assessment tax return and claim Qualifying Care Relief.
It is also important to remember that other income you receive, such as employment income, pensions, savings interest or other self-employed income, may still need to be reported and taxed in the normal way.
What if your fostering payments are higher?
If your qualifying care receipts are more than your qualifying amount, there are different ways of calculating the taxable profit.
You may be able to use the simplified method, which broadly looks at the difference between your qualifying care receipts and your qualifying amount.
Alternatively, you may be able to use the profit method, which involves calculating your actual business income and allowable expenses.
Which method is appropriate can depend on your individual circumstances, so it is worth taking advice rather than assuming that one method will always be best.
Keeping good records still matters
Even though Qualifying Care Relief can make the tax calculation simpler, you still need to keep records of the payments you receive.
It is a good idea to keep your fostering statements, payment records and details of when children or adults were placed in your care.
Having accurate records makes preparing your Self Assessment return much easier and helps make sure the correct relief is claimed.
Don’t forget the tax year
The figures for Qualifying Care Relief can change between tax years.
The figures in this article apply to 2025/26, covering the period from 6 April 2025 to 5 April 2026.
If you are preparing a return for a different tax year, always check the HMRC guidance that applies to that particular year.
When is the 2025/26 return due?
If you are filing your 2025/26 Self Assessment return online, HMRC must receive it by 31 January 2027.
The tax you owe is also normally due by 31 January 2027.
You do not have to wait until January, though. Filing earlier can give you more time to understand what you owe and plan for the payment.
Need help with your foster carer tax return?
Foster carer tax returns have their own particular rules, and understanding how Qualifying Care Relief works can make the process much less daunting.
At Mays Accounting Services, I can help foster carers understand their Self Assessment responsibilities, organise their records and prepare their tax return correctly.
If you are a foster carer and would like some help with your 2025/26 Self Assessment, please get in touch.
Mays Accounting Services – practical, personal support for your tax and bookkeeping needs.
Tax rules and allowances can change. The information in this article is based on HMRC guidance available at the time of publication and is intended as general information, not individual tax advice.