How much extra tax will we have to pay if we become foster carers in chester england we both work part time?

Question

the local authorty have said we can keep our jobs, i earn £8,000 and husband earns £15,000 ,the fees will be £126 age related fee and £102 professional fee per child, we are taking on 2 children, will we have to pay much extra in tax as we both pay tax on our wages now

Answer 1

Yes, as steffi points out the rules fundamentally changed from 6th April 2003 and have been altered since then.

The new reliefs are more generous than before but remember this is the system for taxing caring income only. Normal tax rules apply to all other income.

The "normal" self-assessment rules apply but they have been specially adapted to give extra reliefs from too much tax or burdens of record keeping.

The new income tax reliefs are for foster carers, called (perhaps not surprisingly) "foster care relief", and a new non-statutory relief for adult placement carers for carer of those aged 18 or over. Both are effective from 2003/04. From that year ……

1. "Income" includes any payments (plus those treated as non-taxable under the old system).

2. The rules do not apply to other private fostering arrangements.

3. Under "parent and baby" arrangements The Inland Revenue will treat both as being in foster care and you should be able to claim a weekly amount for each of them when calculating your qualifying amount.*

*My comments do not include any explanation of the new non-statutory basis of taxing income under "Adult Placement" schemes. If guidance is required on this issue please contact The Fostering Network, H. M. Revenue & Customs, Tax Aid or other appropriate body for further advice.

Foster carers can choose to be taxed under one of three systems –

A. Foster care relief total exemption   or

B. Foster care relief simplified basis   or

C. Standard self-employed regulations

A. Foster care relief total exemption

The "individual's limit" for total exemption comprises two parts –

a fixed amount per residence, currently £10,000

Shared between carers, if more than one, in a residence

PLUS

an additional

£200 per week for each child under 11 and

£250 for each child 11 or over [including the week in which the child reaches their 11th birthday]

B. Foster care relief simplified basis

If total exemption does not apply the foster carers can elect to use the simplified basis.

Total income less the “individual's limit” (as above) results in taxable income.

- The simplified basis can only be used if the foster carer applies to the Revenue in writing with a special election.

- Election must be made within 12 months after last filing date.

- Tax Return for the current year, 2007/08, must be filed by 31st January 2009 assuming it is filed online. The latest date by which the "simplified basis" claim can be made is therefore 31st January 2006.

- Generally speaking carers should not choose simplified basis if actual allowable expenses and tax depreciation claims [called "capital allowances"] are greater than the individual's limit.

- You will need to keep records to reach a decision and verify the situation with the tax inspector if asked.

C. Standard self-employed regulations

This is a statement of "business income less expenses".

Income declared is as receivable. Any expenses can be claimed for tax purposes providing they are "wholly and exclusively" for the business.

Tax is calculated on the resulting business profits.

Hope this helps get you started. There is more help online. For example……

http://www.google.com/search?rls=GGGL%2C...

Answer 2

It is many years since I had a query from foster carers, but even back then they were treated as self employed. I only ever had the one query, but the tax rules have since been relaxed in relation to what can be claimed as expenses, according to the current websites.

Both you and your husband will have to do annual Tax Returns, with both employed and self-employed pages. The best website I found was www.thefca.co.uk. I would suggest you contact that association, as they seem switched on, and may be able to help you. Also if you Google foster carers tax uk, other sites come up too.