Thanks for your question
With payments, under the normal foster care arrangements, you have a certain amount per year that can be treated as exempt from tax.
1) First £10,000 per household PLUS
2) £250 per week for each child over 11 and
£200 a week for each child under 11
So add up your tax exempt entitlment and then compare this with the amounts you have received - if you have received less than the exempt amount then you enter NIL as self employed income, If you received more than the exempt allowance, then you enter the difference (the amount paid, less the exempted amount) in the self employed income section, and if this is your only income, and is less than £8105 (for 2012/2013) then you will have no tax liability arising.
If its more than £8105, then you will owe tax and possibly National Insurance
Under the SGO arrangements frok 06/04/2010 all payments are exempt (previously up to 05/04/2010 you looked at the payments received and then are allowed
to deduct (for expenses) the following fixed rates.
But the rules now allow all payments under SGOs and kinship arrangements to be fully exempt, as long as the payments made are made by the childs parents or payments by, or on behalf of, the local authority to
i) a qualifying guardian, and
ii) which are made in relation to a special guardianship order or a residence order.
So when you change over to this arrangement you will be exempt on all payments, just make sure you let HMRC know, so they can update your records accordingly (as you will no longer need a short return to complete unless you continue to offer fostering care/respite care)