Making Tax Digital (MTD) has been on HMRC’s agenda for several years, aimed at modernising how individuals and businesses keep tax records and submit returns. As the rollout approached, we worked closely with the MTD policy team at HMRC and collaborated with our partners at The Fostering Network to ensure the unique circumstances of Foster Carers were properly considered.
Our joint lobbying efforts led to a significant win: Foster Carers would be exempt from MTD unless income outside of fostering (such as rental income or earnings from another self‑employed trade) brought them into the MTD regime.
What’s changing? A new temporary exemption for 2026/27
MTD is scheduled to begin in April 2026. However, HMRC issued an important update in January 2026 confirming that Foster Carers now have a temporary exclusion from MTD until April 2027.
This is a key point: The temporary exclusion applies to all income, not just fostering income.
This means that for the 2026/27 tax year, Foster Carers with additional income sources (such as letting property or running another self‑employed business) will not be required to enter the MTD system, even if that income would normally place them within the MTD threshold.
What happens from April 2027?
From April 2027, the rules change again:
- Foster Carers will still not need to report fostering income under MTD.
- However, any other self‑employed or rental income will fall within the scope of MTD if the total exceeds £30,000.
- Only this non‑fostering income will determine whether a Foster Carer must comply with MTD requirements.
In other words, fostering income remains fully excluded, but other income streams may trigger MTD obligations depending on the threshold.
Need advice? We’re here to help
Tax rules can be complex, especially when they affect more than one source of income. If you would like tailored guidance on how MTD may affect you, our dedicated Foster Carer Tax Team is here to help on 01795 478044.
