We understand the struggles when it comes to calculating child maintenance. In this article we give our top tips to help calculate child maintenance and on what parents need to think about when reaching their own agreement.
Our article Child Maintenance on Separation provides separated parents with an overview of their child maintenance options and how to work out the level of maintenance payable. You can view the article here.
Top tips to help calculate child maintenance.
Here are our top tips to help calculate child maintenance – contact us if you require any further information.
Tip 1: Use accurate and up to date income figures
The Child Maintenance Service (CMS) method of calculating child maintenance is called the gross income scheme. Maintenance calculations are based on gross income figures without any deductions for tax or national insurance. Income will include employment income, pension income (but not UK social security pension), social security income and trading income (after any carry forward trade loss relief). Gross income is then adjusted to take account of any pension contributions made during the year.
The CMS determine gross income using figures provided by HMRC in a self-assessment tax return or under pay as you earn (PAYE) regulations. You will need the P60 or tax return to check last year’s income. Also ask for recent wage slips or drawing statements to check if there have been any changes and ask for an explanation if there are any discrepancies.
Tip 2: Check for any additional income
A variation can be considered by the CMS if there is evidence that the paying parent:
- Has unearned income.
- Has income from assets exceeding an aggregate prescribed value of £31,250.
- Is on a flat or nil rate but has gross weekly income equal to or more than £100.
- Has diverted income.
Rental income and income from savings and investments are not automatically included by the CMS when assessing gross income.
Also be alive to the diversion of income. For example, is the paying parent giving their income to someone else or employing a relative and paying them more than market rate, or are they choosing to have a company car instead of a higher salary? Failing to pay themselves a dividend or gifting a share of the business to a new partner or relative may also be treated as diversion of income.
Finally, look out for excessive pension contributions. There is no limit on the amount of pension contribution a paying parent can make. If you think their pension contributions are excessive, or arrangements have been set up deliberately to reduce the child maintenance liability you can apply to the CMS for a variation.
Tip 3: Check if you can apply for a variation by reason of special expenses
There are five categories of expenses that may mean a variation application can be made:
- Contact costs.
- Expenses attributable to long-term illness or disability of a relevant other child.
- Prior debts.
- Boarding school fees.
- Payments of mortgages, loans, or insurance policies.
For more information on applying for a variation Variations explained: a guide for paying parents (publishing.service.gov.uk)
Tip 4: Consider applying for a ‘top up’ order
The maximum level of income assessable by the CMS is currently £156,000 per annum. If an assessment calculation has been made by the CMS based on the maximum level of assessable income, the court recovers the power to make an order to ‘top-up’ the level of maintenance. It does not extinguish or replace the CMS calculation, rather a top-up order is payable in addition to the CMS child support calculation.
Tip 5: Child maintenance calculator
A child maintenance calculator is available on the government website Calculate your child maintenance – GOV.UK (www.gov.uk). This uses the CMS assessment calculation to provide you with an estimate of the child maintenance payable. Remember when using it our tips above and consider whether additional income or a variation would be appropriate.
Tip 6: Understand the law and your options
It is important that you understand your options and feel comfortable negotiating the level of maintenance directly with the other parent. If not consider applying for an assessment by the CMS. The CMS helpline will however only be able to help you with their services and therefore we advise parents to take early legal advice to fully understand their options. A lawyer can also support you in the background to your negotiations, giving you peace of mind and ensuring that what you agree is fair and properly formalised. You can also consider using mediation or other alternative to court to help you reach an agreement. For more information download:
Guide to Schedule 1 of the Children Act 1989
Watson Morris on Child Maintenance
The team at Watson Morris Family Law have considerable experience advising on child maintenance and financial provision for children. Contact us for more information or if you are looking for a family lawyer.
Written by Caroline Watson
October 12, 2022
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