Benefits – A foster carer’s guide
A foster carer’s guide to income support, universal credit, tax credits and other benefits
1. Introduction to Benefits
Benefits and tax credits are payments from the government to certain people on low incomes, or to meet specific needs.
Foster carers can claim many benefits and it is worth looking into your entitlement.
2. Claiming benefits
Fostered children are not counted as part of your household when any means-tested benefits are calculated.
Equally, the allowances and fees from fostering are not counted as income when calculating any of the following means-tested benefits:
- Income Support
- Income-based Jobseeker’s Allowance
- Income-based Employment and Support Allowance
- Housing Benefit and Council Tax Support
- Universal Credit (which is being phased in to replace the above benefits, including Tax credits).
Many foster carers are in a unique position, as you can choose whether to be deemed as ‘working’ and claim Working Tax Credit or ‘not working’ and claim Income Support (normally if you are a single foster carer).
You can use the benefits calculators that are on the government website.
Find the calculators here: https://www.gov.uk/benefits-calculators
The allowances and fee (if you get one) you receive from fostering are normally completely disregarded as income or only taxable profit from your fostering is taken into consideration to calculate your entitlement to benefits.
For further information about claiming benefits while fostering visit the Government’s website, or download the HMRC’s leaflet on tax credits.
All the Government guidance can be found in the links in the section below.
3. Income Support
As a foster carer, you may be eligible for income support if the child is under 16 years old. The rules are different and do not normally require you to seek work, however, you could be required to attend an interview every 6 months to 3 years to review your claim.
Keep in mind if the child leaves your care then you will need to change to the Job Seekers Allowance.
Most foster carers will be better off claiming Income Support than getting Working Tax Credits but make sure you get expert advice, to ensure you make the right choice in your particular circumstances.
Income Support is a non-taxable benefit. You could get Income Support if you, and your partner if you have one, are not in full-time employment (this is 16 or more hours per week for you and 24 or more hours for your partner). You must also fall into a category of people who do not have to look for work.
The Department of Work and Pensions (DWP) doesn’t count fostering as work and fostering payments do not count as income for Income Support purposes. If your foster child is under 16yrs you can claim Income Support in the weeks that you have a child in placement (or if you don’t have a placement you can claim if you are caring for your own dependent child(ren) under five years or a disabled child/young person).
When you don’t have a child in placement, you can’t claim Income Support, except if you are claiming Income Support for another reason (ie you are a single parent and your child really are under five, or you are getting Carer’s Allowance.
The option here would be to sign on as unemployed and claim Jobseekers Allowance. This can be difficult for foster carers because they have to demonstrate they are available for work and actively looking for work, and of course, this can be very difficult when actually they are waiting for another placement.
Also if you get paid a retainer by your fostering service when you don’t have a child in placement this may be treated as earnings and reduce your entitlement to Job Seekers Allowance.
If you have savings in excess of £16k you will not qualify for Income Support. Your entitlement to Income Support will be reduced if you, or your partner if you have one, have other jobs, or if your partner works for more than 24 Horus and/or if you live with a partner who works more than 24 hours a week.
Mortgage lenders tend to look more favourably on Working Tax Credits than on Income Support, so if you have a mortgage, or are looking to get one, it might be worth considering claiming Working Tax Credit rather than Income Support. If you already have a mortgage, you may be able to get help with mortgage interest payments if you are on certain benefits.
4. Job Seeker’s Allowance
Foster Carers claiming job seekers’ allowance will need to be seeking work for a minimum of 16 hours a week minimum, however, if you have no placement then you will need to be available for 40 hours per week.
5. Housing Benefit
Housing benefit is means-tested so you will need to be under the current threshold for the household income. Fostering income is not regarded as income for the purpose of eligibility.
Housing Benefit is for people who pay rent. You must have a low income and savings of less than £16k to qualify.
The Bedroom Tax
The government put a cap on the amount of housing benefit you can have, and this has been popularly named ‘the bedroom tax’.
What this meant is that if you rent a house, or have social housing but have spare bedrooms your housing benefit is reduced, this is 14% less for one empty bedroom or 25% less if two bedrooms are empty.
Foster children are not seen as members of your household for housing benefit purposes and therefore their rooms are classed as empty.
However, a campaign by The Fostering Network was successful in getting the government to allow one room ‘spare’ for fostering and therefore would not affect your housing benefit.
If you have more than one child local authorities have the power to make Discretionary Housing Payments (DHP).
Here is the relevant section from the DHP government manual:
Support for approved or prospective foster carers
2.14. Foster Carers are allowed 1 extra bedroom under the size criteria rules providing they have fostered a child or became an approved foster carer within the last 52 weeks. This also applies to formal Kinship Carers in Scotland.
2.15. Some claimants may be caring for siblings, or for 2 or more unrelated foster children, and require additional bedrooms. National minimum standards for Fostering Services state that a foster child over the age of 3 should generally have their own room. However, the size criteria rule only allow foster carers (or formal Kinship Carers in Scotland) to have 1 extra bedroom; therefore, a DHP may be awarded to help cover any reduction in HB due to the additional rooms that are required.
2.16. People going through the approval process to become foster carers will need to show that they have a spare room to be approved. If a DHP is paid on this basis it is the responsibility of the claimant to inform their LA of any change of circumstances if, for example, they were not subsequently approved.
6. Tax Credits
There are two types of Tax Credits: Working Tax Credit and Child Tax Credit.
As a foster carer on a low income, you may be able to claim one or both depending on your circumstances. They are non-taxable.
Child Tax Credit
If you are responsible for a child or young person who normally lives with you you will be paid Child Tax Credits. Foster carers however can’t claim Child Tax Credit for a fostered child because they are provided with a fostering allowance which must cover the full cost of caring for their foster children.
Working Tax Credit
Working Tax Credit is to “top up” the pay of people on low paid work. It is based on the hours you work and get paid for. As a registered self-employed foster carer HMRC regard you as working, therefore you are fostering as ‘work’ eligible to claim Working Tax Credits.
The Government has introduced measures to strengthen the eligibility conditions for those claiming Working Tax Credit (WTC) on the basis of being self-employed by introducing a “genuine and effective” test. The test would now be based on the principles of whether self-employment was being carried out on a commercial basis with a view to realising a profit.
Foster carers who opt to use the Qualifying Care Relief, the simplified method to work out self-employed tax, will be considered to have met the new test, even if they do not make a taxable profit.
However, foster carers who exceed the qualifying amount for tax relief and opt to use the profit/loss method may be asked to demonstrate that they are trading on a commercial basis with a view to making a profit.
When applying for Working Tax Credit or Child Tax Credit you need to disclose your profit from self-employment. This is the fostering income you receive that goes over the tax allowance amount of Qualifying Care Relief.
If your fostering income is less than your qualifying amount (tax allowance) you have no profit from fostering, you disclose this as ‘zero’ profits from fostering when claiming tax credits.
The level of tax credits you are entitled to will depend on any profit from fostering and if you live with a partner, their earnings.
7. Universal Credit
Universal Credit is part of the Government’s major welfare reform plans. Universal Credit is being phased in over a number of years and aims to simplify the current benefit and tax credits system. Universal Credit is a means-tested benefit for working-age people who are on a low income. In time, it will replace six existing benefits/tax credits with a single monthly payment.
Universal Credit will eventually replace:
- Income-based Jobseeker’s Allowance.
- Income-related Employment and Support Allowance.
- Income Support.
- Working Tax Credit.
- Child Tax Credit.
- Housing Benefit.
At this time, your eligibility to claim Universal Credit depends on where you live and your personal circumstances. Universal Credit is being introduced gradually. Whether you can claim depends on where you live and your personal circumstances.
If you don’t live in a qualifying area or you are not eligible to claim Universal Credit you may be able to claim other means-tested benefits.
Universal credit is being phased in gradually around the UK, it applies to England, Wales and Scotland. If you are already on benefits you don’t need to do anything, you will be notified by the DWP when you have to claim Universal Credit.
New claims to existing benefits, which Universal Credit is replacing, will then close down, with the vast majority of claimants moving onto Universal Credit. If you are already receiving these benefits or tax credits, they will continue to be paid until you are moved onto Universal Credit.
Fostering fees and allowances will also be disregarded in your Universal Credit claim.
There is an eight-week concession for foster carers from having to sign on as available for work between placements. If you are a foster carer getting Universal Credit, it will continue to be paid, without you having to sign on and look for other work, for up to eight weeks if there is a gap between placements.
Universal Credit will be paid monthly rather than weekly or fortnightly, and you must claim for it online. There is telephone access and face to face in exceptional circumstances, but no paper forms.
If you are a single foster carer of a child aged under 16 years, claiming Universal Credit, you will have to attend work-focused interviews (WFI) at the Job Centre. When the child reaches 16yrs you are still able to get Universal Credit but will have to sign on as looking for work. The work faced interviews are designed to help people prepare for work, but it’s not like ‘signing on’ as unemployed.
If you are a fostering couple who claim UC you will have to decide on a ‘lead’ carer, that carer then attends the WFI’s and the other person will be expected to look for work, there may be exceptional circumstances where they can not due to ill health or if a child needs two full-time carers and this will be discussed individually.
For more information about benefits, you can go to the Government’s website or the charity Turn2us, or for expert benefits advice in your particular circumstances, you can visit your local Citizens Advice Bureau.
8. Council Tax Reduction
Foster carers will need to contact their local authority to find out if and how they support foster carers with Council Tax. You could be eligible if you’re on a low income or claim benefits.
Your council tax bill could be reduced by up to 100%. You can apply if you own your home, rent, are unemployed or working. What you will get depends on where you live, every council runs its own scheme.
It will depend on your personal circumstances, your income, the number of children, your benefits and your household income, this will include savings, pensions and your partner’s income (check how they will treat your fostering payments), if your children live with you and if other adults live with you.
Council Tax Reduction does not apply in Northern Ireland, where a system of rates is in place.
9. Child Benefit
Foster carers cannot claim Child Benefit for any fostered children who are placed with them.
However, you can claim Child Benefit for your own children or other children who live with you (who are not fostered). To find out more contact the Child Benefit Helpdesk: 0300 200 3100 or visit HMRC’s website.
10. Disability Living Allowance (DLA), Personal Independence Payment (PIP) and Carer’s Allowance (CA)
Please see the FosterWiki page on DLA/PIP/CA https://fosterwiki.com/wiki/disability-living-allowance-dla-and-personal-independence-allowance-pip/
11. Benefits Calculator
The charity Turn2Us provides an online benefits calculator. You can upload information about your household and finances and find out which benefits you might be entitled to claim.
Turn2Us benefits calculator: https://benefits-calculator-2.turn2us.org.uk
Government benefits calculator: https://www.gov.uk/benefits-calculators
- Income support: https://www.gov.uk/income-support
- Job seekers allowance: https://www.gov.uk/jobseekers-allowance
- Housing benefit: https://www.gov.uk/housing-benefit
- Discretionary housing payments manual: https://www.gov.uk/government/publications/discretionary-housingpayments-guidance-manual/discretionary-housing-payments-guidancemanual
- Universal Credit: https://www.gov.uk/universal-credit
- Housing costs and Universal Credit: https://www.gov.uk/housing-and-universal-credit
- Tax Credits: https://www.gov.uk/topic/benefits-credits/tax-credits
- Wales – Claim what’s yours: https://gov.wales/claim-whats-yours
- Scotland – Benefits and grants: https://www.mygov.scot/browse/benefits
- Citizen’s Advice Bureau: https://www.citizensadvice.org.uk
- Child Winter Heating Assistance (Scotland) https://www.mygov.scot/child-winter-heating-assistance?fbclid=IwAR3GwA95Sob_ezL5PjDzARVWezvOxNr5fz5CscDm0nSvxZq8qSDhZy-zjuI
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