We thought it would be helpful to provide a selection of the most “popular” queries that we deal with.
Needless to say we constantly review the service and look to improve it.
We look forward to receiving your call and helping you with your questions.
I pay class 1 National Insurance through my employment, but now I’ve received a class 2 National Insurance bill. Do I have to pay it?
If you have been fostering for several years you will have noticed changes recently in the National Insurance system. Class 2 National Insurance has been charged because you have registered with HMRC as a self-employed foster carer. All self-employed individuals between 16 years and state pension age are potentially liable to pay class 2 NICS, prior to 6th April 2015 you were only excepted if you were entitled to claim small earnings exception (for 2014-15 and earlier years) because you had low profits from self-employment (below £5,885 in 2014-15). To claim this you wrote to the National Insurance Contributions Office citing the following:
- Your business turnover – total fostering income
- Your business expenses – the qualifying amount
- Your profit – turnover less expenses
From 2015-16, the administration of class 2 NICs has changed and if you are eligible to pay Class 2 NICs it will be collected along with your tax when you do your tax return. However, you will be automatically exempted from the payments if you have low profits, and therefore have to opt to pay these if your profits are below the Small Payments Threshold (SPT £5,965).
Please be aware that entitlement to certain state benefits such as contribution-based employment and support allowance, maternity allowance and certain bereavement benefits can be affected if you make this claim. However, as a registered foster carer you are entitled to claim National Insurance credits that count towards your state pension, which can be done on HMRC’s form CF411a available online.
As part of our tax return service we will also process your National Insurance. Read more on our National Insurance page.
My spouse and I are both foster carers. Do we both have to register to do tax returns and operate as a partnership?
Only one of you needs to register to complete a tax return – usually the main carer. However, there are sometimes advantages to operating as a partnership.
- Splitting the profits between you can reduce the total amount of tax that you have to pay.
- If you are a self-employed partner, you can claim the National Insurance credits towards your state pension.
If you operate as a partnership, you must formally register this with HMRC, which means that a partnership tax return has to be completed in addition to each partner’s individual tax return. You should be aware that you cannot currently submit partnership returns using HMRC’s online services, and so this would have to be submitted either on paper (by the paper return deadline of
31 October), by purchasing the appropriate software, or by paying for a tax return service. If you are using our tax return service, we will review whether or not it is cost effective to operate as a partnership, by balancing the tax savings against any additional costs to prepare the tax returns and any NI due.
What records do I need to keep as a foster carer for tax purposes?
As a registered foster carer, you are required to keep the following records in order to calculate your profits from fostering and complete your tax return:
- Records of your total fostering income to include reimbursed expenses and fee payments as well as payments for the placements’ maintenance.
- The dates the placements arrive and leave, and their dates of birth.
- Records and receipts for any exceptionally large or unusual expenditure (not normal accommodation and maintenance), which might occur if you are a specialist foster carer.
You should keep your records for at least 22 months following the end of the tax year to which they relate, or 15 months if you submitted the tax return late, whichever is longer.
I’m a foster carer …what benefits am I entitled to claim?
This is one of the most popular queries we receive …but unfortunately there simply is not a “one-size-fits-all” answer to this one!
Many foster carers do not realise that they are eligible to claim benefits and we would encourage you to call us and discuss your situation to ensure you are receiving your benefits entitlements.
Many carers have problems making claims to the relevant agencies and are misinformed about their eligibility to benefits – we can help you resolve these issues.
The tax team are dedicated to giving you quality advice, specialising in matters tailored to your personal needs.
Can foster carers claim marriage allowance?
Marriage allowance can be claimed for the 2015-16 and 2016-17 tax years.
Couples who are married or in a civil partnership can claim the allowance, which transfers personal tax free allowances between couples. The allowance can reduce the household tax bill by £220.
The low earning partner (with taxable earnings of less than £11,000) can transfer part of their unused personal allowance to the higher earning partner (whose earnings must be between £11,001 and £43,000). Remember that a Foster carer’s “earnings” is their PROFIT as calculated using HS236 (receipts less qualifying amounts) and as such this allowance may benefit many Foster caring households.
You apply for marriage allowance at www.gov.uk/marriage-allowance. You can make a backdated claim for the 2015-16 tax year.
HMRC will give the higher earning partner their extra personal allowance either:
- By changing their tax code (this can take up to two months)
- As a result of submitting their self-assessment tax return if they are self-employed
Is my foster child eligible to Disability Living Allowance?
Disability Living Allowance (DLA) is a tax-free benefit for disabled children who need help with mobility or care costs.
To qualify the child must:
- Be under 16 years of age.
- Have difficulty walking or need more looking after than a child of the same age without a disability (they must have had the difficulties for at least 3 months and expect them to last for at least 6 months). Terminally ill children are not subject to the 3 month rule.
- Be in Great Britain, another EEA country or Switzerland when making the claim.
- Not subject to immigration control.
- Be habitually resident in the UK and have actually lived in the UK for a certain period of time.
The child may have to attend an assessment in respect of a claim.
The allowance has a care and mobility component .The care component is paid dependant on the level of need (lowest rate £21.80 per week, middle rate £55.10 per week, higher rate £82.30 week).The mobility component is paid at two rates (lower £ 21.80, higher rate £57.45).
If you spend over 35 hours a week caring for a child who is in the middle or higher rate band you may be entitled to claim carer’s allowance. If you need more guidance, please give us a call and we’ll answer any questions you have.