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From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages is reduced from 12% to 10%. From 6 April 2024, the main rate of self-employed class 4 NIC will reduce from 9% to 8% and class 2 NIC will no longer be due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. Our guidance will be updated in full in spring 2024.

Updated on 6 April 2023

Foster carers and shared lives carers

This information is designed to help foster carers, shared lives carers (including adult placement carers), certain kinship carers and those offering staying put care understand how tax and National Insurance (NIC) works for them. Below, we refer only to foster carers and shared lives carer,s but that should be read as including those other categories of carer, as appropriate.

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Income tax and qualifying care relief (QCR)

It is important to understand that foster carers and shared lives carers are required to register with HMRC as self-employed unless they are being paid through a payroll as an employee with tax and National Insurance contributions being deducted by their employer (which is unusual).

There is a single, statutory income tax relief for all called qualifying care relief (QCR). This includes foster care, adult placement care, kinship care, staying put care and parent/child arrangements. In order to be qualifying care, the child (or adult) needs to have been placed with the carer by a local authority or an authorised social care scheme.

For the definition of qualifying care as it applies to foster carers see our page Qualifying care relief and foster carers.

For the definition of qualifying care as it applies to shared lives carers see our page Qualifying care relief and shared lives carers.

For details of how QCR works see our page Qualifying care relief.

Capital gains tax

For information on the capital gains tax implications of fostering or supporting a shared lives service user in your home when you decide to sell your house see the section on foster carers and shared lives carers on our page Selling your home.

Universal credit and tax credits

For information regarding tax credits when you are a foster carer or shared lives carer see our page Working tax credits.

For information regarding Universal Credit when you are a foster carer or shared lives carer see our page Universal credit: basic conditions.

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