Great news for foster carers: you're exempt from making tax digital

Great news for foster carers: you're exempt from making tax digital

If you're a foster carer worried about Making Tax Digital (MTD) that’s started this April (2026), here's some welcome news: you don't need to use it for your fostering income.

What's the MTD exemption?

HMRC has specifically exempted foster carers from MTD requirements. This means you can continue filing your Self-Assessment tax return exactly as you do now - no quarterly digital updates, no mandatory software, no additional costs.

Why the exemption?

HMRC have recognised that foster carers already benefit from simplified tax treatment through Qualifying Care Relief. Since most foster carers have little or no taxable profit anyway, requiring quarterly digital reporting would create unnecessary burden without any real benefit.

What This Means Practically

  • Your fostering payments don't count toward the income thresholds that trigger MTD (£50,000 from April 2026, dropping to £30,000 in 2027)
  • You can keep records however you like - paper diaries, spreadsheets, or digital if you prefer
  • You continue filing once a year by 31 January as usual
  • No need to buy MTD software or learn new systems
  • Your existing Qualifying Care Relief arrangements stay the same

What if you have other income?

The exemption only covers fostering income. If you also run a separate business or let property and that income exceeds the MTD thresholds, you'll need to use MTD for those activities only. Your fostering income stays outside the system and continues to be reported annually.

For example: if you receive £45,000 in fostering payments plus £35,000 from a side business, only the business income counts toward MTD thresholds. You'd need MTD for the business from April 2027 (when the £30,000 threshold applies), but your fostering income remains exempt and is reported on your year-end tax return, as before.

Summary

Foster carers can focus on what matters - caring for vulnerable children and young people - without worrying about tax digitalisation. Your current tax processes continue unchanged, saving you time, stress, and the cost of software subscriptions.

For detailed guidance on Qualifying Care Relief, see HMRC's Helpsheet HS236 or contact us for a chat.

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