(Last reviewed 04/04/2025)
Financial Information
We understand that money matters for foster carers can feel complex. We are here to reduce confusion and guide you through any financial terms.
Allowances for Foster Carers
Foster carers receive £462 each week for children aged 0 to 10 years and £490 each week for young people aged 11 to 17 years. This payment is split into a carer’s allowance and an accountable allowance
- Carer’s allowance – this portion belongs to the foster carer. It covers the carer’s fee and
the household costs such as rent, utility bills, food, and other living expenses. - Accountable allowance – this portion must be spent on the child, as set out
in the child’s initial placement agreement (see details below)
| O to 10 years old | 11 to 17 years old | |
| Details | Amount | Amount |
| Carers allowance | £387 | £400 |
| Accountable allowance (including savings) | £75 | £90 |
| Total | £462 | £490 |
We are increasingly asked to monitor and record how the accountable allowance for each child is spent. We ask foster carers to keep simple records of spending in the key areas listed below. Your supervising social worker will review this spending over time.
| Categories of Accountable Expenditure – per week | Under 11s | Over 11s |
| Pocket money | £0- £5 | £5 – £25 |
| Savings | £10 | £10 |
| Educational & leisure activities | £5 – £20 | £5 – £20 |
| Toys, books, educational and leisure equipment | £10 | £10 |
| Clothing and Footwear | £15 | £15 – £25 |
| Festivals & Birthdays | £5 | £5 |
| Holiday/activity allowance | £0 – £15 | £0 – £15 |
| Personal Care | £0 – £15 | £5 |
| Mobile phones | £0 | £5 |
| Total expenditure to be accounted for | £75 | £90 |
The figures above are guidelines and should be individually agreed for each child.
Foster carers, young people, and social workers can decide together to spend more or less in any category. However, the total accountable expenditure must still add up to:
• £75 for children aged 0 to 10 years
• £90 for young people aged 11 to 17 years
Where possible, it is good practice for foster carers to support and encourage children and young people to open their own bank accounts.
Please record any money gifted to a child or young person in your weekly notes, and ensure it is either saved or used appropriately.
Payments in between children being placed
Please note that when no child is in placement, no fees or allowances are paid. Foster carers are encouraged to budget and build savings to cover any gaps between placements.
The only exception is a retainer, which may be paid when a child has been matched with a family but there is a delay before they move into the foster home. This payment is not automatic: each local authority has its own policy on retainers under its contract framework, so please clarify this at the point of matching.
Local authorities have strict contracts with fostering organisations and will not pay twice for the same child; they only pay for the bed the child is using. Therefore, foster carers are paid only for the nights a child is living with them. When a child leaves the home, payments to Positive Aspirations Group—and therefore to the foster carer—stop immediately.
Allegations
If a foster carer (or anyone in their household or support network) is the subject of an allegation and is therefore unable to foster, no fees or allowances will be paid. Allegations can arise unexpectedly at any point in a foster carer’s career. Please factor this possibility into your budgeting so you can stay financially stable if an allegation occurs.
Respite
Please note that, some years ago and at the request of foster carers, Positive Aspirations Group combined all allowances—historically paid separately—into the weekly fee to help carers budget for their own household needs. For example, main foster carers are not paid for periods of respite with another Positive Aspirations foster carer because this fee is already included in the weekly payment. We recommend that foster carers set aside some funds each week to cover costs should respite be needed.
Tax and National Insurance Contributions
Registering as ‘self-employed’ with Her Majesty’s Revenue and Customs (HMRC)
HMRC views foster carers as ‘self-employed’. If you are a new foster carer, please do two things right away: register as self-employed as soon as your fostering service approves you, and start keeping a record of the children you care for, the dates they stay with you, and their ages. If you do not register with HMRC, you may face a financial penalty.
You can register with HMRC by telephone—call the HMRC Newly Self-Employed helpline on 0300 200 3504—by completing the paper form CWF1 (downloadable from HMRC’s website), or online at: https://www.gov.uk/register-for-self-assessment/self-employed
Registering online is usually the simplest option. It automatically sets you up to file your tax return online and prompts you when it is due.
After you register as self-employed, you are automatically registered for Class 2 National Insurance contributions.
Don’t worry!
If you have never completed a tax return before, the process can feel daunting—but HMRC has done everything possible to keep it simple and straightforward.
Everyone—whether foster carers or not—receives an annual personal allowance, which changes each financial year (see https://www.gov.uk/income-tax-rates for the current amount). This is income on which the Government charges no tax. In addition, the Government provides ‘qualifying care relief’—an extra allowance for foster carers who look after a child, called your ‘qualifying amount’, on which no tax is paid.
The qualifying amount varies for each foster carer, depending on how many children you foster, their ages, and how long you care for them within the tax year. Given your qualifying amount, you will probably find you do not have to pay any tax or National Insurance on the income you earn from fostering.
Getting started
HMRC offers a short course to help you get started. It explains how to register, keep records for tax purposes, calculate your qualifying amount, and decide whether you owe any tax or National Insurance.
Visit http://www.hmrc.gov.uk/courses/syob3/fc/index.htm to follow the entire process.
We have also created our own online training course specifically for foster carers. You can work through it at your own pace on the agency fostering training website. If you have not yet signed up, please ask your supervising social worker.
Use the link for your agency to access and sign up for the online training:
Greater London Fostering: https://glf.fosteringtraining.com/
Fostering Hearts: https://hearts.fosteringtraining.com/
South Coast Fostering: https://scfostering.fosteringtraining.com/
To keep foster carers well-informed about their tax responsibilities, we regularly arrange training sessions on tax returns. Details of upcoming courses appear in the monthly Positive Aspirations Group newsletter.
Sending in your tax return
Once you are registered as self-employed, you must send a tax return each year, covering the period from 6 April in the previous year to 5 April in the current year. You have until 31 October of the current year to send a paper tax return, or until 31 January of the next calendar year to file online. If you register online, HMRC will email reminders to help you submit your return on time.
Working out if you owe tax to HMRC
As a foster carer, you have two ways to check whether you owe tax to HMRC – the ‘simplified method’ and the ‘profit method’. The courses listed above explain both methods in detail.
Using the ‘simplified method’
With the simplified method, you use the records you kept during the tax year (including each placement’s length and the child’s age) to work out your ‘qualifying amount’ for that year.
Your ‘qualifying amount’ has two parts:
• a fixed annual rate*
• a weekly rate for each child, based on their age*
*Both the annual and weekly rates may change when HMRC reviews them. Email finance@positiveaspirations.co.uk to confirm the current figures.
A tax week runs from Monday to Sunday, and any part of a week counts as a full week. For example, if a child stays with you from Thursday to the following Tuesday, HMRC counts that as two weeks.
If you look after a disabled child, you can add any extra costs – such as specialist equipment – to the qualifying amount.
After 5 April, the agency will send you a statement of earnings showing all income you received from fostering in the previous tax year. If this total – including fees, allowances, birthday and Christmas payments, mileage, and any other expenses – is less than your qualifying amount, you owe no tax. Any income above the qualifying amount is taxable and is treated as your ‘taxable profit’.
Remember: if you have no other income (for example, from another job), you can still use your full personal allowance in addition to your qualifying amount from fostering.
Using the ‘profit method’
With the profit method, you deduct your actual fostering expenses from your fostering income for the tax year. This option is usually only helpful if your fostering costs are very high.
In practice, you must keep detailed records of every fostering expense and keep all receipts as proof for HMRC. You also need to show what share of your household costs (such as bills and food) relates to fostering, which can be difficult.
To ease the paperwork, HMRC may let you track your fostering costs for a shorter sample period and then use that average weekly or monthly figure when completing your tax return.
For any ‘profit’ on your fostering income, you can still use your personal allowance before tax is calculated – as long as you have no other income.
Special types of fostering and tax
If you privately foster a child (i.e. you are paid directly by the child’s parents), or if you provide family and friends care or short-break/respite care for a child who is not ‘looked after’ by the local authority, the payments you receive do not qualify for ‘qualifying care relief’. However, if the payments are made under Section 17 of the Children Act 1989 (support for children in need), they remain tax-free.
HMRC uses the term ‘shared lives’ to describe several other placement types. For parent-and-child care, even if only the parent is ‘looked after’, you may still apply ‘qualifying care relief’ to payments from the local authority for both parent and child. When a young person turns 18 and the local authority asks you to continue caring for them – either as a Shared Lives foster carer or through Staying Put – you can still claim a version of ‘qualifying care relief’. For full details, visit: http://www.hmrc.gov.uk/manuals/bimmanual/BIM52758.htm
If you hold a special guardianship order or a residence order (and you are not the child’s parent or step-parent), any payment you receive is exempt from tax under the ‘qualifying guardians’ exemption. These payments are not considered self-employment income, so you do not need to include them on a self-assessment tax return.
Foster caring and national insurance
All self-employed people must register to pay Class 2 National Insurance contributions. The rate changes each financial year (see the current amount at https://www.gov.uk/self-employed-national-insurance-rates). When you register as self-employed with HMRC, you are automatically registered for National Insurance.
You do not have to pay Class 2 contributions if your profit is below the Small Profit Threshold (see the amount at https://www.gov.uk/self-employed-national-insurance-rates), but your eligibility for benefits and a state pension may be affected. You can apply for National Insurance credits – using form CF411A from HMRC – to protect your record.
If your fostering profits exceed the Upper Profit Threshold, you must pay the higher rate, Class 4 National Insurance contributions.
For more information, call the HMRC Self-Employed National Insurance Contributions Helpline on 0300 200 3500.
Employment Support Allowance
Employment Support Allowance may be available if you are unable to work because of an illness or disability. You will need to take a work capability assessment to understand how your condition affects your ability to work and manage everyday tasks. This benefit is usually not affected by your fostering role, as long as it involves no more than routine household duties.
Benefits not covered by universal credit
As Foster Carers you may be entitled to the following benefits:
Carers Allowance
You may qualify for Carer’s Allowance if you spend at least 35 hours a week supporting someone who receives one of these benefits:
• Personal Independence Payment – daily living component
• Disability Living Allowance – middle or highest care rate (being replaced by Personal Independence Payment)
• Attendance Allowance
• Constant Attendance Allowance at or above the normal maximum rate with an Industrial Injuries Disablement Benefit
• Constant Attendance Allowance at the basic (full-day) rate with a War Disablement Pension
• Armed Forces Independence Payment
Council Tax
Council tax and any reductions are managed by your local authority. By law, fostering income should be ignored when your council tax discount is assessed, but local rules can vary, so please check with your council.
In general, the following are considered when working out your entitlement:
• Your weekly household income
• Savings and capital assets worth more than £6,000 (your main home is excluded)
For more information about benefits, you may wish to contact these free advice services:
• Tax Credit Helpline: 0345 300 3900
• Foster Talk: 0121 828 6058 (Mon–Fri 9 am–5 pm) – foster carers are entitled to free advice from Foster Talk
• Your local Citizens Advice Bureau
• Turn2us: https://www.turn2us.org.uk/
Council Tax Contribution for Foster Carers
We are committed to supporting our foster carers and recognising the challenges you face, especially with the rising cost of living. From 1 March 2024 we have introduced a structured council-tax contribution scheme to ease this pressure and honour your invaluable work. At the time of writing, this initiative is unique to the Positive Aspirations Group.
Key Features:
• Contribution Structure: Payments follow a sliding scale based on the number of years you have fostered with the Positive Aspirations Group, rewarding long-term commitment and encouraging continued fostering.
• Frequency of Payment: The contribution is paid monthly, on the last working day of the month, directly into your bank account.
• Entitlement: You qualify for the contribution if you foster at any time during the month, even for just one day.
• Exclusion: Sadly, ‘staying put’ arrangements are not included in this scheme.
Amount
| Number of years as a Positive Aspirations Foster Carer (GLF, FH & SCF) | 0 to 4 years | 5 to 9 years | 10 to 14 years | 15 to 19 years | 20 + years |
| Contribution per year per household | £330 | £550 | £800 | £1,100 | £1,500 |
| Per month | £27.50 | £45.83 | £66.67 | £91.67 | £125.00 |
Benefit Calculator
The charity Turn2us offers an online benefits calculator. You can enter details about your household and finances to see which benefits you may be able to claim: https://www.turn2us.org.uk/Benefit-guides/Beginner-s-Guide-to-Benefits/Checking-benefit-entitlement#guide-content
