My understanding is that Foster Care Payments can be split into three types: 1. basic fostering allowance – paid during a period when a child is on placement 2. fees – additional money on top of basic allowance paid during a period when a child is on placement, e.g., to reflect your skills and experience and the complexity of the child’s needs 3. retainers - paid during periods when no child is on placement
Benefits Both the basic fostering allowance and additional fees paid by a Local Authority, while you are fostering a child, are ignored as income when assessing your eligibility for means tested benefits.
Income Tax Regular fostering allowances are not taxable nor are any additional fees made to meet expenses incurred by foster carers. Most LA have an arrangement with the local tax office that a percentage of the additional fees will be treated as covering expenses. The remainder will be taxable income. So, if you get additional fees you will be treated as self-employed and may have to pay tax and National Insurance on some of this and you must register as self-employed with the Inland Revenue.
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