Have you ever wondered what Qualifying Care Relief is and if you can claim it? Find the answers to your commonly asked questions below:
What Is HS236 Qualifying Care Relief (Formally Known As Foster Care Relief) And How Does It Work?
Qualifying Care Relief (HS236) allows carers to claim round sum allowances as costs which in many cases make their caring income tax free.
To work out your qualifying amount, you would need to keep records of all payments you receive from:
- Your local authority
- Health and Social Services Trusts in Northern Ireland
- Your Fostering Service Provider
The Qualifying Care Relief HS236 help sheet gives Foster carers standard allowances as costs of their business each tax year.
Who Can Use Qualifying Care Relief?
You can use qualifying care relief if you have children or adults placed with you by:
- A local authority
- Health and social care trusts in Northern Ireland
- A fostering service provider
- A shared lives services provider
Qualifying Care Relief HS236 covers:
- Foster care
- Shared lives care
- Kinship care
- Staying put care-where a young person who was fostered continues to receive care after their 18th birthday
- Parent and child arrangements –where the parent is aged 18 or over and the child is not a “looked after child”
- Supported lodgings schemes-unless the relationship is more similar to that of a landlord and tenant rather than that between family members
How Do I Claim Qualifying Care Relief On My Foster Carer Tax Return?
You would need to complete a self-assessment tax return. The self-employment pages should include your profit calculated using the Qualifying Care Relief HS236 help sheet.
Private arrangements with friends or relatives do not qualify for relief.
Your income from Fostering is the total income that you received for your Fostering duties, including reimbursed expenses, mileage, clothing allowances, etc.
An individual has to pay tax on their total taxable income in the year – whether or not a carer has to pay tax will depend on their level of Fostering income and other income.
What Is A Qualifying Amount?
The amounts you can claim under qualifying relief are:
A household allowance of £10,000 per tax year (pro-rata if you are not a Foster carer throughout the tax year)
Plus a weekly amount depending on the age of the foster children you look after:
- £200 per week for every week or part of a week you look after a child under 11 years of age
- £250 per week for every week or part of a week you look after a child over 11 years of age
A fostering week runs from Monday to Sunday.
Total receipts from Fostering are £37500.
How Does Qualifying Care Relief Work?
The easiest way to demonstrate how the relief works is by example:
A fostering household looks after two foster children, one aged 13 who has been with them throughout the tax year and one aged 9 years of age who stays one night a week under a respire arrangement.
The Foster carers profit under HS236 is calculated as follows:
TOTAL INCOME: £37,500
Household allowance 10,000
13 year old
£250 *52 13,000
9 year old
£200 *52 10,400
TOTAL COSTS = £33,400
PROFIT = £4,100
This profit is calculated before the deduction of the individual’s personal tax-free allowance (£12,500 in 2019-20) thus if a Foster carer has no other taxable sources of income they will have no tax to pay on their fostering profit.
Will The Relief Affect My National Insurance Contributions (NIC)?
As a self-employed person, a Foster carer has to ensure they correctly deal with their Class2 National Insurance entitlement as failing to do so will impact on their state pension entitlement –in the UK at the moment a taxpayer needs 35 years of NI contributions to be entitled to a full state pension at retirement age.
If your profit from fostering as calculated using HS236 is over £6,365 (2019/20)then Class 2 NI contributions should be added to your tax liability and paid with your income tax liability (if you use HMRC software this should automatically happen ).
The payment of these contributions will ensure the tax year is added to your pension entitlement.
What If My Profits Are Very Low – Will I Still Need To Pay Class 2 NIC?
If your profit from fostering is under £6,365 you will not be asked to pay Class2 NI via your tax return. If you have no other sources of income you should submit your tax return and then complete form CF411A-Credit for Parents and Carers. You need to obtain a letter from your agency confirming you Fostered in the tax year and sent the CF411A form and letter to HMRC. HMRC check all your submissions and credit your record with a year’s NI contributions –saving you from paying and adding to your years of entitlement.
How To Claim Qualifying Care Relief On A Tax Return
Intellect Tax can help you to claim qualifying care relief. We have over a decade’s experience of preparing and filing Foster carer tax returns –we currently file around 3,500 Foster carer tax returns each year. You complete a simple questionnaire about your income for the tax year and we do everything else. Using specialist software we will produce a fully compliant self- assessment tax return and inform you of your liabilities and status for NI purposes. We file your tax return and will deal with any HMRC inquiries or feedback from the process.
We offer our clients an all-inclusive fixed fee service for this work-there are no additional charges for any correspondence arising from the tax return submission. Do you what benefits you could be eligible for? Find out more in our Foster Carers Benefit guide.
For more guidance and advice, call us on 0121 794 2289