At Orange Grove, we want individuals from all backgrounds to foster, provided they have the space in their homes and hearts to do so, of course.
That’s why we’re committed to being completely transparent when it comes to the fostering allowance, highlighting the excellent tax-free financial support you can receive with a rewarding career in fostering.
In this blog, we break down everything you need to know about fostering finances, including a breakdown of fostering allowances, tax, national insurance, benefits, pensions, working alongside fostering, and more.
Understanding the allowance for foster carers
As a foster parent, you’ll receive an allowance for every night a child stays in your home. Generally, this is completely tax-free, which you can read more about later in this blog.
How much you receive for fostering will vary depending on your fostering provider and the type of foster care you provide; however, it will comprise the following elements:
- Child’s allowance: To cover the cost of caring for a child, including food, clothing, personal care items, hobbies and activities, travel expenses, and more.
- Foster parent payment: To reward you for your hard work, experience, and unwavering dedication.
Other benefits of fostering with Orange Grove
As well as a generous tax-free fostering allowance, you’ll receive:
- Birthday allowance for each child in your care.
- Religious festival allowance for each child in your care.
- Access to hundreds of discounts for shops, restaurants, family days out, and more.
- Generous Refer-a-Friend scheme – up to £3,000 for every family you successfully refer to us.
Tax relief for foster parents
Income from fostering is normally tax-free, depending on the number of children in your care and whether you have any other sources of income.
The foster carers tax allowance – also known as ‘Qualifying Care Relief’ (QCR) – consists of the following two elements:
- An annual tax exemption of £18,140 per household
- A tax relief for each week a child spends in your care, based on their age:
- Under 11 years old - £375
- 11 years old or older - £450
If your total income from fostering is less than your QCR, you will not pay tax.
For example…
Rosie fosters a 16-year-old for the whole year and a 10-year-old for 10 weeks of the year. She does not have to pay tax on the first £45,290 she earns from fostering:
Tax exemption = £18,140 + Child 1 (52 x £450) = £32,400 + Child 2 (10 x £375) = £3,750
Total QCR = £45,290
National insurance for foster parents
While the different types of National Insurance for foster carers may initially seem complex, understanding them can be straightforward. There are three types of National Insurance Contributions (NICs) relevant to foster parents, which we'll explore below.
- Class 2 NICs: You’re not required to pay Class 2 NICs if your taxable income from fostering is less than the Small Profits Threshold of £6,725 per year (23/24). You may choose to pay voluntarily to qualify for contributory benefits.
- Class 3 (NI Credits): You may wish to apply for National Insurance Credits each year as they contribute towards your ‘qualifying years’ for the state pension.
- Class 4 NICs: You’re only required to pay Class 4 NICs if your taxable income from fostering is over £12,570 (23/24).
Stay up-to-date with the latest information on rates and allowances for NICs on the Government website.
Benefits for foster parents
The following overview highlights some benefits foster parents can claim if they meet the criteria.
We strongly advise seeking professional advice for any specific queries related to your circumstances.
Means-tested benefits
When determining your eligibility for this kind of benefit, fostering income is typically disregarded.
So, if you qualified for a means-tested benefit before fostering, you should be eligible to receive it after approval, provided your financial circumstances (excluding fostering income) remain unchanged.
Some examples of means-tested benefits that foster parents may be able to receive:
- Universal Credit
- Pension Credit
- Housing Benefit
- Tax Credits (Child Tax Credit and Working Tax Credit)
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Income Support
Other benefits foster parents may be able to receive:
- Disability benefits like Disability Living Allowance (DLA), Personal Independence Payment (PIP) and Attendance Allowance.
- Carer’s Allowance – if you’re a carer and foster parent.
- Child Benefit – not for children you foster.
Fostering while working
Even though you’ll receive a generous allowance, we understand that some people want to work and foster.
At Orange Grove, our primary focus is always the safety and well-being of our young people. Nevertheless, we strive to offer flexible and creative support to foster parents who need to balance fostering with employment responsibilities, whenever possible.
Considering the practicalities together
- During the assessment, we will carefully consider the practicalities of managing your employment alongside fostering. Some key considerations include:
- Your employment situation, including working hours, flexibility, and location.
- Your support network: Who will assist you in meeting the unique needs of young people in your care?
- Matching preferences: What age range are you open to supporting? Are you willing to consider older children and teenagers who may require less hands-on supervision?
If you want to work and foster, we recommend speaking with one of our fostering advisors. Give us a call on 0800 369 8513 or complete our online enquiry form.
8 key takeaways
We understand that all this information can feel overwhelming. That's why we've compiled a list of key points below.
- The fostering allowance covers various expenses associated with caring for a child, including food, clothing, personal care items, hobbies, activities, and travel expenses.
- Foster parents receive a professional fee as part of the fostering allowance.
- The fostering allowance is generally tax-free due to Qualifying Care Relief (QCR).
- Foster parents are considered self-employed and need to register with HMRC, submit annual tax returns, and keep records of income and fostering dates.
- Foster parents are only required to pay National Insurance Contributions (NICs) if their profits from fostering are above £6,725 (2023/24). You may wish to pay voluntary Class 2 NICs or apply for Class 3 NI Credits.
- Fostering income is typically disregarded when determining eligibility for means-tested benefits. If you qualified for a means-tested benefit before fostering, you should still be eligible after approval.
- You can foster and claim your pension if you’ve reached retirement age.
- Working alongside fostering is possible, however, considerations include employment situation, support network, and matching preferences.
Speak to our team today
If you're interested in fostering, complete our enquiry form below and one of our friendly fostering advisors will be in touch.
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