TAX RETURN GUIDANCE FOR FOSTER CARERS 2018
The paper tax returns deadline for 2018 is fast approaching (31st October 2018), so now is a good time to ensure you’re fully prepared. If you have recently been approved as a foster carer, working out and filing your tax return may seem a little complicated. That’s why we’re here to help! Unfortunately, filing your tax return is not as straightforward as the PAYE system you likely would have used with previous employers, as all foster carers are required to register themselves as ‘self-employed’.
Once you have got to grips with how to manage your foster care tax return, you will then qualify to receive payments for your foster caring up to your personal tax threshold without being liable for further tax. Due to the relatively high threshold, when calculations have been done, the vast majority of foster carers will find that in actual fact they don’t have any tax to pay. Below you will find some useful tax information that we have put together to assist you with the upcoming tax return. You will also find answers to some frequently asked questions from our experience with our own foster carers.
TAX RETURN GUIDANCE
How to register yourself as self-employed:
As soon as you are approved as a foster carer you should register as self-employed. You can register yourself as self-employed by visiting the HMRC website here. The type of registration that you select will vary, depending on whether you foster on your own or as part of a couple. Either way, you will still be solely responsible for filing your individual self-assessment tax forms at the end of each year.
How to calculate your ‘qualifying amount’ of tax:
Below you will find a two-part calculation that can be used to work out your qualifying amount of tax for each year.
£10,000 per household (please note that this is not per carer, and is worked out on a pro-rata basis for those who have not been a registered foster carer for the full tax year).
Between £200 and £250 per child per week during their placement with you.
This second amount depends on the age of the child that you are fostering. Children who are aged 10 and under qualify for £200 per week, whereas children who are aged 11 plus qualify for the additional £50 per child per week (meaning a total of £250 per child per week for those who are aged 11 and over).
How to calculate if you owe tax:
Add up the total amount you have received in foster caring payments in the tax year (the 6th of April to the following 5th of April). If you don’t have a full record of this information, then you’ll be able to obtain it from your fostering agency in the form of a statement. Take your qualifying amount from the calculation above and deduct it from your total fostering payments for the year. If your income from fostering is below your qualifying amount then you will have no tax to pay.
How to submit your tax return:
You can complete your tax return either online or via a paper form in the post. If you decide to return your tax form via post, it must be received by HMRC by the end of October of the same year (so for year end 5th April 2016, your form is due by the 31st of October 2018), hence the need to begin preparing now. For online submissions, you have an extended time, which is by the end of January the following year (January 2019 for the year ending 5th of April 2018).
Both forms of submission will require the same information – your ‘business expenses’ which will be your qualifying amount, as calculated above, your ‘business turnover’ which is your total fostering payments for the year, and your ‘net profit’ which is the difference between the two, if there is any. If you have not reached or exceeded your threshold for the year then enter £0 in the ‘net profit’ box to indicate that you have nothing to pay tax on.
SOME FREQUENTLY ASKED TAX QUESTIONS
I’m a registered foster carer, but I don’t currently have any placements. Do I have to do this?
Yes, being registered as self employed is a legal requirement in the UK, even for those carers who don’t currently have a placement, and whether or not you have any tax to pay. This is in order for you to be eligible for the specialist tax scheme known as the Qualifying Care Relief (QCR) which has been put together especially for carers. We’d recommend that you register as being self employed as soon as you become a registered foster carer to ensure you don’t end up having problems later on.
What is Qualifying Care Relief (QCR)?
QCR is the tax scheme that has been developed specifically for foster carers. The method works out your qualifying amount for tax, which is the amount of income you’re allowed to earn from your caring prior to becoming liable to pay tax on the earnings. Your Qualifying Care Relief amount is dependant upon a number of things that are unique to you and your fostering circumstances, and are substantially more generous than the usual self employment tax payable for other careers, meaning foster carers often benefit substantially from significantly lower tax payments.
Can my fostering agency do this for me?
Unfortunately, your fostering agency isn’t able to either register for self assessment tax on your behalf, or calculate your tax due. They can, however, provide you with assistance in finding the relevant resources and help to make the process as easy as possible for you. If you’re unsure, then speak to your fostering agency to see if they can offer you guidance, but they can’t complete the process on your behalf.
My foster child has just turned 18 but is still living with us. Are we still entitled to use the Qualifying Care Relief tax scheme?
Yes, the QCR tax system can also be used in some other circumstances, and one of the most common is where a child has remained with their foster family after the age of 18, most often referred to as ‘Continuing Care’.
Is the process the same if I foster with a local authority?
Yes, the process of working out your tax and the systems involved are the same whether you’re with a local authority or a private fostering agency.
I’m a foster carer, but I also have a part time job. Will this impact my tax threshold?
No, your qualifying amount for your foster caring income will not be effected by your job. Your personal tax threshold will apply to your regular job, and your qualifying amount for your foster caring will apply to your foster care payments only. If you are under the threshold on both counts, then you will have no tax to pay.
If you have any trouble with calculations, or are wondering where to go to for help and advice, contact your fostering agency in the first instance, they should be able to give you the guidance that you need.