All Foster Carers are classed as Self Employed and can choose whether to be taxed using one of two methods – the Simplified or Profit methods.
This is the most common method. Your ‘qualifying amount’ for a tax year consists of two parts
- Your Annual Fixed Amount per household of £10,000
- Plus your Weekly/Part Week Amount of £200 (under 11 years old) or £250 (over 11 years old)
If your income exceeds this level under the Simplified Method your are taxed on the difference.
This method works best if you have high expenses, to use this method you need to keep detailed records of all your expenses including capital expenditure. Using the Profit Method you don’t use the allowances but prepare detailed accounts on which you are taxed.
Foster Carers are subject to Class 2 and Class 4 National Insurance.