From 6 April 2003 a new tax relief for individuals who provide foster care services to local authorities, either directly or through an agency, will be available.
The relief will consist of two elements:
- foster carers whose gross receipts from foster care do not exceed an individual limit in a year will be exempt from tax on their income from foster care; and
- foster carers whose gross receipts from foster care exceed the individual limit, will be able to choose an optional, simplified, method of calculating their profits instead of using the normal rules.
At present foster carers are taxed on any profit they make under Case I, II or VI of Schedule D. Under a longstanding administrative arrangement, foster carers are normally treated by the Inland Revenue as having a profit only if they receive payments which their local authority identifies as “reward”.
Under the new relief, any such foster carer receiving gross receipts from foster care in a year under an individual limit will be exempt. “Exempt” means that the individual will be treated as having a profit or loss from foster care of “nil”.
The exemption will apply solely to income obtained from the provision of foster care.
Foster carers whose gross receipts in a year from the provision of foster care exceeds their individual limit will be able to choose between:
- computing their business profits using the normal rules; or
- treating as their profit the amount by which their gross receipts from foster care exceed their individual limit.
The individual limit will be made up of two elements:
- a fixed amount per residence of £10,000 for a full year; and
- an additional amount per child for each week, or part week, that the individual provides foster care. The amounts will be £200 a week for a child aged under eleven and £250 a week for a child aged eleven or older.
1.5 OTHER RELIEFS
- The threshold for tax exempt rents under the Rent a Room scheme for tax year 2003/2004 remains at £4,250.
1.6 TAX ON SAVINGS INCOME
The starting rate of 10% will apply to the first £1,960 of taxable income.