Qualifying care relief replaced foster carer relief in 2010 in order to give relief to shared lives carers (adult placement care, kinship care, staying put care, and parent and child arrangements) in addition to foster carers.
You will have heard in the Spring Budget that the Chancellor has increased the allowances which qualifying carers are able to offset against their qualifying care receipts.
As you are no doubt aware, the relief has existed for some time now in the form of a fixed amount per household and a weekly amount depending on the age of those cared for, making up a total qualifying amount.
If the total payments received in relation to the provision of care are less than the qualifying amount, HMRC treats you as not making a profit or loss for the year so you will not pay tax or Class 4 National Insurance on the caring income.
If the total payments received are more than the qualifying amount, you are given a choice of 2 ways to work out the amount subject to tax and Class 4 National Insurance. You can either pay tax and Class 4 National Insurance based on the difference between your caring income and:
- the qualifying care allowance, or
- any actual expenses incurred and capital allowances you are entitled to claim.
The qualifying care allowance dispenses with the need for you to keep detailed records of related expenditure and until the latest increase in allowances this may have already meant that you do not need to pay tax on foster care income. The increase in the allowances will eliminate even more qualifying carers from a liability to tax and Class 4 National Insurance on their receipts. You are therefore more likely to have a reduced liability under the new rules if you have paid tax and Class 4 National Insurance previously.
The allowances before and after 5th April 2023 are as follows:
|Type of allowance||After 5th April 2023||Before 6th April 2023|
|Weekly amount – under 11||£375||£200|
|Weekly amount – 11 and over||£450||£250|
|Weekly amount – adults||£450||£250|
It is anticipated that the new rates will increase annually in line with the Consumer Price Index.
So for example, if you cared for two children both for a full year, one below 11 and one 11 or above, you could earn up to £61,040 under the new rulesbefore you incurred a liability to tax and Class 4 National Insurance.
At TaxAssist Accountants, we can help make sure that the new allowances are correctly claimed and that you do not need to pay more tax and Class 4 National Insurance than is necessary.
Find out more about the Spring Budget
To find out what other tax changes The Chancellor announced in the Spring Budget, please click here.
Date published 15 Mar 2023 | Last updated 16 Mar 2023This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Gary has spent over 30 years looking after the tax affairs of individuals, small businesses and trusts in East Anglia. Gary is Senior Technical Manager at TaxAssist Accountants and contributes to guides and articles for clients.
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