The tax exempt amount
Foster Care special rules
The tax exempt amount is made up of two elements:
1) An allowance of £10,000 for having a property available for foster care. It is time apportioned if a carer does not have premises available for the full tax year. Entitlement to this element is based on availability rather than placement; so the allowance is available from the date a carer is registered as a foster carer with the local authority, not from the date of the first placement. This can be significant, particularly in the first year in business.
Example 1: Monique is registered as a foster carer from 5 May 2010, but does not have her first placement until 5 October 2010. For 2010/11 she is entitled to 11/12 of £10,000 as a tax exempt allowance – 5 May 2010 – 5 April 2011.
2) In addition, there is a weekly allowance of £200 per week for a child under 11; and of £250 per week for a child of 11 and over. Part weeks are counted as full weeks.
Example 2:
Alex fosters 2 children during the tax year to 5 April 2011; one is aged 9 and the other is aged 13. He registered as a foster carer in March 2010, i.e. before the start of the 2010/11 tax year. His income from foster care is £34,600. The child under 11 was with him for 32 weeks; the older child for 52 weeks in 2010/11.
Tax exempt amount £
Basic ‘fixed’ amount 10,000
Weekly amounts:
£200 x 32 (for under 11) 6,400
£250 x 52 (for 11 and over) 13,000
Total tax free amount £29,400
As Alex’s income is £34,600, he will have no tax liability as the profit is below his personal allowance of £6,475. (Gross income of £34,600 less 29,400 exempt = £5,200 taxable profit).
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