How do you budget on a fostering income?

Most people who ring us have already found the weekly figures on our website. What they want to know next is harder to look up: what a fostering income actually feels like to live on, month after month, in a real household with a mortgage and a car and a food shop. This is that answer.

Please note: this is general information, not personal financial advice. Tax thresholds and benefit rules change, and how they apply depends on your own circumstances. Check the current guidance on GOV.UK, and get individual advice where money decisions matter to you.

The short answer

Fostering money behaves differently from a wage, and that is the whole of the budgeting problem. It arrives weekly rather than monthly. It is paid while a child is living with you, so it stops when no one is. Part of it is not really yours, because it is there to pay for the child. For tax purposes you are self employed, but for benefits purposes fostering is not treated as work at all. None of that is difficult once you know it. It is only difficult if you find out in month three.

The households that manage this well tend to do three things: they know which part of the weekly payment belongs to the child, they plan for the weeks when no child is living with them, and they ask their agency the awkward questions before they sign anything rather than after.

What lands in your account, and when

At South Coast you receive one weekly payment for each child living with you. It combines an allowance towards the cost of caring for that child with a professional fee that recognises your time and skill. Our published rates are £479.50 a week for a child aged ten or under and £507.50 a week for a child aged eleven or over, with parent and child fostering published at £987 a week. We also make a council tax contribution. You can read the full picture on our fostering payments and allowances page, and the mechanics of how fostering pay is put together in our guide to how foster carer pay works in Southern England.

The National Minimum Standards for fostering services in England set out what every agency in the country owes you here, and they are worth knowing because they give you things to ask for. Standard 28.2 requires that payments are “made promptly at the agreed time and foster carers are provided with a statement of payment at the end of each tax year.” That end of year statement is the single most useful piece of paper in a fostering household’s finances, because it is what you reconcile your own records against.

Standard 28.5 requires “a clear and transparent written policy on payments to foster carers that sets out the criteria for calculating payments and distinguishes between the allowance paid and any fee paid.” Standard 28.6 says that policy and the current level of payments must be given to every carer annually. Standard 28.3 requires that allowances and fees are reviewed each year, and that the service consults carers before changing either.

So if you have never seen your agency’s written payment policy, you are entitled to it. Ask.

The part of the money that is not yours

This is the part new carers get wrong most often. A meaningful share of the weekly payment is there to cover what the child needs: food, clothes, shoes that stop fitting, bus fares, swimming lessons, a phone top up, the school jumper that goes missing in week two.

On top of that, children have money of their own. National Minimum Standard 2.7 says that “children receive a personal allowance appropriate to their age and understanding, that is consistent with their placement plan.” That is pocket money, and it is not optional or discretionary generosity on your part. It gets agreed and it gets paid.

What surprises people is how much sits outside the weekly figure altogether. Standard 28.1 says each foster carer receives at least the national minimum allowance for the child, “plus any necessary agreed expenses for the care, education and reasonable leisure interests of the child, including insurance, holidays, birthdays, school trips, religious festivals etc.”

Read that list again, because it is the answer to a question that worries a lot of people before they apply. A residential trip to France, a birthday, a bike, the cost of taking one more person on a family holiday: these are agreed expenses, not things you are expected to absorb quietly out of the weekly payment. They have to be agreed, which means asked for, which means knowing to ask. Standard 28.9 adds that where a child is eligible for benefits because of a disability, carers are encouraged to apply for them.

A simple habit helps here. Keep the child’s money separate in your head, or better, in a second account. When you know what the weekly payment is doing, you know what is genuinely available to your household, and the number is usually smaller and steadier than people assume.

The gap between children is the real question

Our own money page says it without dressing it up: a child living with you is not guaranteed, there may be time between children, and it is sensible to discuss what that means for your household budget. We would rather say that plainly on the website than have someone discover it in April.

The weekly payment is paid while a child is living with you. When no child is, it is not. That is true of every fostering service in the country, independent agency or local authority, and it is the single most important thing to plan around.

Three things soften it in practice.

• A good agency treats an empty spare room as its problem, not yours. Our position, stated on our own transfer page, is that an approved carer who is not fostering is a failure on our part. Ask any agency you speak to how long their carers typically wait, and ask them what they do about it.
• The benefits system already understands the gap. Fosterline’s guidance on Universal Credit describes a continuous and unbroken period of eight weeks between children before full work search requirements apply, provided you show you intend to carry on fostering. So a few weeks without a child living with you is a recognised part of the job, not a cliff edge.
• Short breaks and short notice work can fill space. Some carers offer short break fostering alongside longer arrangements. It is worth asking your agency how payment works for a stay of a few days, because the arrangement should be agreed before the first one rather than after.

The practical version of all this: work out what your household needs each month without any fostering income at all, and know how many weeks of cover you have. Most carers we know keep a buffer for exactly this reason, and once it exists they stop thinking about it.

Tax, in one paragraph

Foster carers are self employed for tax purposes, and fostering has its own generous relief called Qualifying Care Relief. In practice most carers pay little or no tax on their fostering income, but you still have to register with HMRC and file a return each year. We have written the whole of that up separately in do foster carers pay tax?, including the registration deadline, the filing dates and the two ways of working out your profit.

For budgeting purposes the useful habit is simply this: work out roughly where you sit against the relief threshold once a year, when the end of year statement arrives, rather than guessing in January. If you are comfortably under, there is nothing to set aside. If you are near it or over it, you now have nine months to put money by instead of three weeks.

One more thing that catches people out. If your fostering profit is nil under the simplified method, you build up no National Insurance record from it. That affects your State Pension rather than your weekly budget, and there is a fix: a form called CF411A. We explain it in our piece on fostering later in life, and South Coast writes the letter confirming you fostered.

Benefits, and a distinction worth understanding

The rules contain an oddity worth knowing about. For tax you are self employed. For means tested benefits, The Fostering Network’s guidance puts it plainly: “Fostering is not treated as work or self-employment, but as providing a service.” And on the money itself: “Fostering income is disregarded (ignored) when calculating all means-tested benefits.”

Fosterline says the same thing about Universal Credit specifically: all fostering payments are disregarded as income. You still declare them, with a note that they should be fully disregarded, because the assessor cannot ignore what they have not been told about.

What fostering does change is what the system expects of your time. Fosterline sets out the position for a single foster carer: no work related requirements while caring for a child under one, work focused interviews only while caring for a child aged one to fifteen, and normal work search requirements once the child is sixteen or over, with an exception where a young person needs full time care and the fostering service evidences it. For a couple, one of you is nominated as lead carer and is generally exempt from work search while caring for a child under sixteen, while the other is treated normally.

And a small point with real money attached: The Fostering Network states that “you are allowed one extra bedroom for fostering, even if you do not currently have a child living with you.” That matters if your Universal Credit includes help with rent. We cover the room question more fully in do you need a spare bedroom to foster?

Five costs people forget to budget for

• Telling your insurer. The Fostering Network’s position is that you do not need specialist home insurance to foster, but most fostering services will expect you to tell your insurance company that you are fostering. Do it before approval, not after, and ask what it does to the premium.
• The car. More seats used, more miles, more fuel, and a business use question for your motor insurer. Driving is not a requirement of fostering, but if you do drive, the mileage goes up.
• Childcare, if you work. Foster carers can access the extended free childcare entitlement for a child aged from nine months, but the conditions are specific: the carer must be in some form of paid employment outside their fostering role, and the hours must be part of the child’s care plan. Kent County Council’s guide for carers sets this out clearly, and other councils in our region follow the same national rules. Do not assume it is automatic.
• Heating and hot water. An extra person at home all day in February is a real line on a bill, and it is one people notice more than they expect.
• The first few days. Children often arrive with very little. Ask your agency what it provides towards clothing and equipment at the start, and get the answer in writing.

Money and the child

Budgeting in a fostering household is not only about your own accounts. One of the more quietly valuable things a foster carer does is teach a young person what money is and how it behaves, and there is money that belongs to the child to work with.

The Fostering Network does not publish pocket money rates, but says carers have an important role in “educating and supporting children and young people in the responsible use of money, including pocket money, short term and long term savings”, and that local authorities and fostering services should ensure children in care have savings made on their behalf.

There is a national scheme behind that. The Share Foundation, appointed by the Department for Education, sets up and oversees Junior ISAs for children in care. A child may be eligible if they have been continuously in care for at least twelve months and do not already have a Child Trust Fund, and eligible accounts receive an initial £200 government contribution. At eighteen the account becomes fully accessible to the young person, and helping them understand what is in it and what to do with it is a real piece of care rather than an administrative step. If a child comes to live with you, it is a fair question to ask their social worker whether an account exists.

The everyday version matters just as much: a bank account, a first debit card, working out what a phone contract really costs across two years. Our article on life skills and independent living skills goes further into that side of it.

What to ask before you commit

Whether you talk to us or to somebody else, these are the questions that change the financial picture. Any agency worth joining will answer all of them without flinching.

• Can I see your written payment policy, and how much of the weekly payment is allowance and how much is fee?
• What is the longest one of your carers has waited for a child recently, and what happens to my income while I wait?
• Which expenses are agreed on top of the weekly payment, and how do I request them?
• What do you provide towards clothing and equipment when a child first arrives?
• How and when do allowances get reviewed, and are carers consulted first?
• Will you write the letter I need for a National Insurance credits claim?

Our own money page includes a set of questions it invites you to ask us, which we think is the right way round. If a service is uncomfortable being asked about money, that tells you something before you have signed anything.

You won’t have to do this alone

Nobody starts fostering because of the money, and no honest agency would suggest otherwise. But the practical truth is that a household under financial strain has less to give a child, and we would far rather you went into this with your eyes open and your sums done than discover a problem eight months in.

So our supervising social workers ask about the household as well as the child, and we publish our rates rather than making people prise them out of us. Our support includes somebody at the end of a phone at any hour, and the council tax contribution is there because a household bill is a household bill. A child isn’t just given a home, they’re given a chance, and that works best when the home behind it is steady.

Frequently asked questions

Do foster carers get paid when no child is living with them?

No. The weekly payment is paid while a child is living with you, which is why planning for the gaps matters. Ask any agency you speak to how long its carers typically wait between children, and build a buffer that covers your household without any fostering income at all. The benefits system recognises a continuous eight week period between children before full work search requirements apply, provided you intend to carry on fostering.

Does fostering income affect Universal Credit or other benefits?

Fostering income is disregarded when means tested benefits are calculated, according to The Fostering Network, and Fosterline says the same of Universal Credit. You still have to declare it, with a note that it should be fully disregarded. What does change is what is expected of your time: a single carer looking after a child under one has no work related requirements, and a carer looking after a child aged one to fifteen attends work focused interviews only.

Do I need to save up for a tax bill?

Most foster carers pay little or no tax on their fostering income because of Qualifying Care Relief, so for many the answer is no. The sensible habit is to check where you sit against the threshold once a year, when your end of year statement of payment arrives, rather than finding out the following January. Our guide to tax and Qualifying Care Relief goes through the mechanics.

Who pays for school trips, birthdays and holidays?

National Minimum Standard 28.1 says a foster carer receives the allowance for the child plus any necessary agreed expenses for their care, education and reasonable leisure interests, and it names insurance, holidays, birthdays, school trips and religious festivals. The word doing the work is “agreed”, so ask your supervising social worker how the process works before the letter about the residential trip comes home.

Do I have to tell my home insurer that I foster?

You do not need specialist home insurance to be a foster carer, but The Fostering Network says most fostering services will expect you to tell your insurance company that you are fostering. It is worth doing early, and worth asking what it does to your premium so there are no surprises.

Can I foster and keep a job?

Many people do, particularly where a partner is at home or the child is at school. It depends on the child’s needs and on your flexibility, and it is one of the things we talk through honestly at the first conversation. If you work, ask about the extended free childcare entitlement, which foster carers can access for a child aged from nine months where the carer is in paid work outside fostering and the hours are part of the child’s care plan.