Foster carers could be exempt from paying tax

The Treasury has recommended harmonising the tax arrangements of
foster carers across the country to help make fostering more
attractive, writes Derren Hayes.

The proposals, released last week by the paymaster general Dawn
Primarolo, would exempt the vast majority of foster carers from
paying any income tax.

Currently, income tax arrangements for foster carers are
negotiated locally between a council and the local tax office. This
can mean some carers are taxed on the expenses they are paid by a
local authority for looking after a child, while in other areas the
amount paid in expenses may not only be higher, but also
untaxed.

Under the Treasury plan, payments to cover the capital costs of
providing a foster care service up to £10,000 would be tax
free. An additional amount per fostered child of £200 for
those aged 11 and under and £250 aged 11 or over to cover
weekly living expenses would also be tax free.

Reward payments, mostly only available to carers working for
independent fostering agencies, will continue to be taxed as either
self-employed income or gross taxable receipts.

If given the go-ahead by the Chancellor when he announces his
budget next week, the new arrangements will apply retrospectively
from 6 April. Foster carers are to be consulted on the proposals,
and amendments to them could still be made if they were found to be
unhelpful.

A Fostering Network spokesperson said that, it would be good to
do away with the current “piecemeal” approach, and
“hopes that higher thresholds will be put in place for carers who
are looking after children with disabilities.”