Is Foster Care Allowance Taxable?
A foster carer in the United Kingdom is entitled to a weekly allowance to cater to the needs of the child. Is this allowance a taxable benefit? Learn about it here today!
What is foster care allowance?
A foster care allowance is a weekly payment to a foster carer to cover the cost of caring for a child. The allowance varies depending on various factors like age and needs of the child, location, and the experience of the foster carer.
The expected minimum weekly allowance ranges between £137 and £240. However, this could go up if your circumstances require more allowance.
Will your allowance be taxed?
The foster care allowance that you receive is not subject to Income Tax. Therefore, you don’t have to worry about paying taxes for the money you have received to care for foster children.
However, it doesn’t just end there – you will need to calculate your tax threshold to determine if you have gone overboard or you are within the limits. You will be liable to pay tax if you have gone over it because it will be termed as taxable profit.
Factors that determine whether you will pay tax or not
Firstly, we’ve stated that generally foster care allowance isn’t taxable. We’ve also mentioned that you could pay tax if your tax threshold is surpassed. With these two pieces of information, here are the factors that determine whether or not you will pay tax:
- The number of children you have fostered
- Other sources of income e.g. part-time job
- If you are receiving enhanced payments
- If you are operating as a partnership in your tax obligations.
Conclusion
Many factors will determine if you will pay tax. In general, your sources of income including foster care allowance should not be higher than the Qualifying Care Relief. If it goes above it, then you will have to pay tax.
Do you still have more questions? The UK Government link below will have more details. https://www.gov.uk/support-for-foster-parents/tax-arrangements
