How Child Maintenance Service calculates your income

Unless a paying parent receives certain benefits, the Child Maintenance Service (CMS) will work out the weekly child maintenance amount they should pay using their taxable gross annual income. This is earnings from employment, self-employment (profits from a business), occupational or personal pensions and certain benefits.

Gross annual income

Gross annual income is the paying parent’s  yearly income before Income Tax and National Insurance are taken off, but after occupational (employer) or personal pension scheme contributions are taken away.

The CMS will get this financial information from HM Revenue & Customs (HMRC), making sure it is for a complete tax year and will always tell the paying and receiving parent (parent with care, 2003 scheme) which tax year has been used.

It will then use this figure to calculate the amount of child maintenance that should be paid each week. If a paying parent  or a receiving parent (parent with care, 2003 scheme) can show that the figure supplied by HMRC for the latest tax year is at least 25 per cent different than the current income, they can request a new calculation.

Pensions

A paying parent’s income is reduced if they pay into an employer (occupational) pension scheme or a private pension scheme.

If they pay into an employer pension scheme, the paying parent does not need to tell CMS about the amount they pay as the employer will have already taken this into account when calculating their income.

If a paying parent pays into a private pension scheme they should let CMS know as this is taken into account when calculating the amount of child maintenance payable.

Benefit income

If a paying parent gets benefits, the flat rate of child maintenance will usually apply and a fixed weekly amount of £7 will be paid by the paying parent. This is usually taken directly from the benefit. Only one £7 payment will be taken each week no matter how many children are involved in the case.

CMS will still follow a six step process to work out the final amount as this could be reduced if there is shared care.

Highest amount of income taken into account

The highest amount of a paying parent’s gross weekly income that the CMS can take into account on the 2012 scheme is £3,000. If the paying parent’s gross weekly income is more than this, the receiving parent (parent with care, 2003 scheme) can apply to the court for extra child maintenance.

The paying parent refuses to provide information about their income

If the paying parent, their employer or their accountant has not supplied any income information to HMRC that CMS can use to make a child maintenance decision, there are steps CMS can take.

They can ask the paying parent directly to give information about their gross income – their employer or their accountant can also provide this.

If CMS does not get the information they need, they can:

  • make a best evidence assessment
  • make a default maintenance decision

Best evidence assessment

A best evidence assessment is when CMS uses previous information held about a paying parent’s gross weekly income, or official statistics (such as the government’s Annual Survey of Hours and Earnings) to work out an amount of child maintenance that must be paid.

Default maintenance decision

A default maintenance decision is when CMS applies a default rate based on the number of children the paying parent must pay child maintenance for. These rates are:

  • £39 a week for one child
  • £51 a week for two children
  • £64 a week for three or more children

Under the default maintenance decision, the paying parent may pay a higher amount of child maintenance until the right information is received. They may also have to pay arrears as they may have been paying less than they should have been.

Paying parents who are self-employed

If you are a paying parent and are self-employed you must pay child maintenance in the same way as any other paying parent.

CMS will work out the amount you have to pay, based on your net weekly income and the number of children you are paying maintenance for. The only difference from employed parents is the way CMS work out your earnings.

How CMS works out earnings from self-employment

If possible, CMS will work out your average weekly earnings from the most recent tax year. If they can’t because you have only recently started self-employed work, they will use figures from the gross income your business has earned.

To work out your earnings, CMS will take away from the gross income of the business:

  • any reasonable expenses paid to run the business (not including capital spending or business entertainment expenses) 
  • and VAT

CMS will then use this figure (your average weekly earnings) to work out how much maintenance you must pay in the same way they do for paying parents not in self-employment.

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