Foster carers must register as self-employed within six months at the end of the tax year in which they were approved by the 5th October.
Once completed you will be given a unique taxpayer reference (UTR).
HMRC will also send you an activation code through the post so that you can submit your self-assessment tax return forms online.
You need to use this number to activate the service within 28 days or else it will expire, and you will need to sign up for an online account again later
You can register as self-employed in the following ways:
You will need to have your national insurance number and the start date of your self-employment (i.e. the date you were approved as a foster carer).
If you call, be aware that HMRC uses digital recognition software as part of their phone system. For example, when the system says "what is the purpose of your call today?", respond with "registering as self-employed".
If you foster as part of a couple, there are a few options available when deciding how to register your self-employment:
One partner (often the main carer) registers as self-employed and accounts for all the fostering payments. This allows the partner to use any of their unused personal allowance.
Both partners register as self-employed as sole traders, and they split the Qualifying Care Relief (QCR) tax threshold and any profit 50/50. This is commonly used where both partners are fostering fulltime, they have a profit from their fostering and they both have available their personal tax allowance (in addition to the QCR tax allowance).
Both partners enter into a ‘partnership’ where each tax year they have the flexibility to split any taxable profit however they like, e.g. 60/40, 70/30, 20/80. This can be helpful where a partner might have some other employment and their earnings might change from year to year.
Note: The Qualifying Care Relief has increased significantly, therefore more foster carers will be below their threshold and have no tax to pay. The need/advantage to enter a partnership is only in very exceptional cases. HMRC will accept any of the above arrangements. Think about what makes best financial sense in your situation.
