The general rule is that taxable income is taken into account in calculating someone's Child Tax Credit and Working Tax Credit. This includes someone's income from employment and self-employment, foster carers are classed as self employed. However, the current rules mean many UK foster carers now pay no tax on the money they earn from fostering.
If foster carers total foster care receipts are less than their qualifying amount, the profit from foster caring for both tax and tax credit will be nil. Fostering allowances which qualify for tax relief are ignored:
Currently up to £10,000 per year
£200 per week for each child under 11
£250 for each child 11 or over.
More information about foster carer's income......
On average, Independent Fostering Agencies pay a basic weekly fostering allowance and fee of £420 per week for all ages of children. Some IFAs also pay foster carer enhanced payments of up to double their standard rate, dependent on the needs of the child, such as :
The weekly allowance for each child fostered is intended to cover living costs such as food, clothes, basic travel and household bills. There is also a reward element for the foster carer in recognition of the demands of the fostering task.