Fostering allowances and pay explained

Allowance vs professional fee what is the difference?

This is the first thing to understand, and it is something many people are not clear on. Foster carers in England receive two separate payments, not one.

The fostering allowance is money intended to cover the day-to-day costs of caring for a child. Food, clothing, school trips, activities, transport, pocket money, birthday and Christmas gifts. It is not income for you it is money to spend on the child.

The professional fee (sometimes called a skills payment or carer payment) is payment for your time, skill, and commitment as a foster carer. This is your income. Not all agencies pay a separate fee local authorities often roll everything into one figure but independent fostering agencies (IFAs) typically pay both.

How much do foster carers receive?

The government sets national minimum fostering allowance rates each year. These are the floor, not the ceiling. Most IFAs pay above these rates, and specialist placements attract significantly higher payments.

The figures below are based on current national minimum rates for England. Actual payments from agencies are usually higher.

Specialist placements therapeutic fostering, UASC, remand, solo placements, complex needs attract considerably higher rates, often £600 to £900+ per week in total.

What the allowance is meant to cover

The fostering allowance is designed to meet the reasonable costs of caring for a child. It typically covers:

• Food and meals
• Clothing and shoes
• School equipment, trips, and uniforms
• Pocket money appropriate to the child's age
• Activities, hobbies, and clubs
• Transport to school, contact visits, and appointments
• Birthday and Christmas gifts
• Holidays (some agencies provide an additional holiday allowance)
• Toiletries and personal care items

Some agencies also provide additional payments for specific costs such as respite, training days, or exceptional expenses. Ask your agency what additional support is available beyond the standard weekly payment.

Can fostering replace my income?

This is one of the most important questions prospective carers have, and one of the least honestly answered by agency websites. The truthful answer is: for many carers, yes it can.

There is no right or wrong approach. What matters is being honest with yourself and with your agency about what you are trying to achieve, so they can match you with placements that work for your household.

Tax and Qualifying Care Relief

Foster carers are not employees. They are self-employed for tax purposes, which means HMRC treats fostering income differently from a salary. The key benefit is something called Qualifying Care Relief.

Qualifying Care Relief works by giving every foster carer a tax-free threshold made up of two parts. A fixed annual amount (currently £10,000 per household) plus a weekly amount per child based on their age. For most foster carers, particularly those with one or two children, the total relief means they pay little or no income tax on their fostering income.

However and this is important being effectively tax-free does not mean you can ignore HMRC. You still need to:

• Register as self-employed with HMRC
• Complete a self-assessment tax return each year
• Keep records of all payments received from your agency
• Calculate your tax position correctly using Qualifying Care Relief

Most carers who do this properly end up with a nil tax bill. But the calculation still needs to be done and the return still needs to be filed. HMRC needs to see the numbers even when no tax is due.

Keeping records as a self-employed foster carer

Because you are self-employed, you are responsible for keeping your own financial records. This does not need to be complicated, but it does need to be consistent. At a minimum you should keep:

• Monthly or weekly payment statements from your agency
• Records of placement dates and the ages of children in your care
• Details of any additional payments received (holiday allowances, training payments, exceptional expenses)
• Records of any allowable expenses you plan to offset

A simple spreadsheet is sufficient for most foster carers. Some use accounting software. What matters is that when you complete your self-assessment return each year, you have the information you need without having to chase your agency for old statements.

How fostering income affects benefits

This is a complex area and the rules vary depending on which benefits you receive. The general picture is as follows.

Fostering allowances are disregarded for most means-tested benefits, which means they do not count as income when calculating your entitlement. This is generally positive news for carers on Universal Credit, Housing Benefit, or Council Tax Support.

However, the professional fee element of your income may be treated differently. Some benefits treat the fee as earned income, which could affect your entitlement. The interaction between fostering income and Universal Credit in particular can be complicated, and the rules have changed in recent years.

The safest approach is to speak to a benefits adviser before you start fostering, particularly if you are currently receiving means-tested benefits. Your agency should be able to point you toward specialist advice. Do not rely on general guidance from the internet for your specific situation.

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