Shared lives carers

A new system for taxing people who are paid to look after vulnerable adults was introduced on 6 April 2010.  This system mirrors the special tax rules for foster carers (see http://www.hmrc.gov.uk/pbr2009/pbrn22.htm). Consequently, shared lives carers from 2010/11 can work out their taxable income using similar ‘special rules’ to foster carers:

Shared lives carers can deduct the following tax exempt amounts when they work out their taxable income from shared lives care:

1)  £10,000 per household for having a property available for ‘shared lives’ care. This is time apportioned if a carer does not have premises available for the full tax year. The allowance is available from the date a carer is registered as a shared lives carer with the local authority, not from the date of the first placement. So only a proportion may be available, particularly in the first or last years in business.

Example1:

Brian is registered as a shared lives carer from 5 May 2010, but does not have his first placement until 5 October 2010. For 2010/11 he 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 exempt amount of £250 per ‘shared lives’ adult. Part weeks are counted as full weeks 

You compare the total of these exempt amounts with the total of your income from providing shared lives care (this may consist of several elements, such as income from the local authority, housing benefit, and a payment made by the ‘shared lives’ individual).

You only have taxable ‘profits’ from shared lives care if your total income exceeds the exemptions. Even when there is taxable income, you can use your tax free personal allowance (£6,475 for those under 65 for 2010/11) against this income, unless you have other taxable income. 

Note: Shared lives care may be undertaken by a partnership for tax purposes. In this case HMRC advise that the exemptions should be set against partnership income. Each partner would then have a personal allowance to set against their share of the partnership profit 

If you were an adult carer in the tax year 2009/10, the previous rules applied for that year. These can be found in the HMRC helpsheet 236(2009/10 version – see Helpsheet 236 (2009-10)).

You can also choose to continue to use these rules during 2010/11.

Shared lives carers and tax credits

Shared lives carers are treated as in ‘paid remunerative work’ with regard to the shared lives care they provide.  Consequently they are in principle eligible to claim working tax credit (subject to the usual income limits).  This is so even if your taxable income is ‘nil’ under the special rules.  You need to decide how many hours to declare when you claim working tax credits.  To be eligible for working tax credits, you normally need to be working 30 hours a week (or 16 hours, if you have a disability or are responsible for a child).