What taxes do foster carers pay in 2026/27? UK Tax Guide

For individuals providing foster care in the 2026/27 tax year, the UK tax system offers highly generous exemptions. While HM Revenue & Customs (HMRC) treats most foster carers as self-employed for tax purposes, the vast majority pay absolutely no income tax on their fostering income.

If you are evaluating your tax obligations, answering what taxes do foster carers pay requires understanding a specific statutory framework known as Qualifying Care Relief (QCR). This guide breaks down the updated 2026/27 QCR thresholds, how to calculate your taxable profits, and your National Insurance responsibilities.

What is Qualifying Care Relief (QCR)?

Qualifying Care Relief is a statutory tax simplification that effectively exempts a significant portion of a foster carer’s income from taxation. Sections 803 to 828 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) provide the legal basis for this relief.

To qualify, an individual must provide accommodation and maintenance for a child as a foster carer.  This covers children placed by local authorities or independent fostering agencies.  Importantly, the legislation strictly excludes private fostering arrangements, parents of the child, and individuals who hold parental responsibility for the child.

The 2026/27 QCR Thresholds

The government indexes QCR rates to inflation, meaning the tax-free limits increase annually. For the 2026/27 tax year, the qualifying amount comprises two distinct elements:

1. The Fixed Amount: Every fostering household receives a flat-rate tax exemption for the year. For the 2026/27 tax year, this fixed amount is £20,440.  If multiple approved carers live in the same household, they must share this single £20,440 allowance.

2. The Weekly Amount: On top of the fixed amount, carers receive an additional tax-free allowance for every week (or part-week) they provide care to a placed individual. For 2026/27, the weekly amounts are:

• £430 per week for each child under 11 years of age.
• £515 per week for each child aged 11 or over, and for each adult.

Calculation Example: If a carer fosters one 14-year-old child for the entire 52-week tax year in 2026/27, their total tax-free qualifying amount is £47,220 (£20,440 fixed amount + £26,780 weekly amount).

How to Calculate the Tax Due

If your total fostering receipts from the local authority or agency fall below your combined qualifying amount, your taxable profit is automatically treated as nil.  You pay no income tax on this money.

If your fostering receipts exceed your qualifying amount, HMRC gives you two choices to calculate the taxable profit:

1. The Simplified Method: You ignore your actual expenses entirely. You simply take your gross fostering receipts, deduct your QCR qualifying amount, and pay tax only on the remaining balance.
2. The Profit Method: You ignore the QCR limits entirely. Instead, you calculate your profits like a standard business by taking your gross receipts and deducting your actual, receipted expenses and capital allowances.

Most carers find the simplified method far more beneficial and less administratively burdensome.

Do Foster Carers Pay National Insurance?

Because HMRC classifies foster carers as self-employed, National Insurance Contributions (NICs) rules apply to their profits. However, the exact NIC liability depends entirely on the profits remaining after applying the QCR deductions.

“Profit made by an individual in a tax year from the provision of qualifying care is deemed to be nil for income tax and Class 4 NICs purposes if total receipts from qualifying care do not exceed an individual qualifying amount.”

• No Taxable Profit: If your receipts fall below the QCR limit, you have zero taxable profits. You are not liable for Class 2 or Class 4 NICs.  However, you may choose to pay Class 2 NICs voluntarily to protect your State Pension entitlement.
• Excess Profits: If you generate taxable profits above the QCR limit, you will only pay Class 4 NICs if those remaining profits exceed the Lower Profits Limit.

Exemption from Making Tax Digital (MTD)

A significant concern for self-employed individuals in 2026/27 is the rollout of Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), which mandates quarterly digital reporting for businesses earning over £50,000.

Foster carers benefit from a strict statutory exclusion here. HMRC confirms that any income qualifying for Qualifying Care Relief does not count towards the £50,000 MTD qualifying income threshold.  Therefore, even if a carer receives £60,000 in fostering allowances, this income will not drag them into the MTD quarterly reporting regime.

Summary Table: Foster Carer Tax Rules 2026/27

For completeness, if a foster carer generates no taxable profits because their receipts fall below the QCR threshold, they should verify their National Insurance record and consider claiming Specified Adultcare Credits (Class 3) or paying voluntary Class 2 contributions to ensure they do not create a gap in their State Pension accrual.