Child Maintenance – how is it calculated and what are the limitations?

The Child Maintenance Service (CMS), formerly known as the Child Support Agency, was founded in 1993 and has provided the baseline method for calculating child maintenance across the last 3 decades but it does have significant limitations.

One of the limitations is that if one parent lives outside of the UK then the CMS does not have jurisdiction, with another being that the CMS calculation can be ‘maxed out’ with the receiving parent needing to apply to the court for the figure to be topped up as required.

How is child maintenance calculated?

If the paying parent’s annual income is less than £156,000 then the CMS calculation will apply as confirmed by the statute. This will be subject to adjustment and reduction in the event that the care of the children is shared:

• For a gross weekly income of less than £7.00; there will be no child maintenance payable
• For a gross weekly income of between £7.00 and £100.00 (or if the paying parent receives benefits, there will be a flat rate of child maintenance payable of £7.00)
• If the gross weekly income is £100.01 to £199.99 then there is a reduced rate, which consists of a flat rate of £7.00 for the first £100.00 of income and the remainder between £100.01 to £200.00 as to 17% for one child: 25% for 2 and 31% for 3 or more
• If the paying parent’s gross weekly income falls between £200.00 to £800.00 then the basic rate will apply at 12% of income for 1 child: 16% for 2 and 19% for 3 or more
• Finally, for a gross weekly income of between £800.01 and £3,000, the first £800.00 is taken into account using the Basic rate and the remainder from £800.01 onwards is at 9% for 1 child: 12% for 2 and 15% for 3 or more children

A recent case study

Recent developments in the court by Mr Justice Mostyn (James v Seymour [2023] EWHC 844) have adjusted the formula calculations to support the cases where the paying parent’s income is between £150,001 and £650,000. When calculating his Adjusted Formula Methodology (AFM) the judge confirmed that there are several steps which need to be taken:

Step 1 – Calculate the paying parent’s gross earned income as disclosed in the most recent P60 or tax return.

Step 2 – Once that figure has been ascertained, reduce it by the number of other children living in his/her household (if there is one then reduce it by 11%; if two then it is a reduction of 14% and if three or more it is 16%).

• From this figure, annualize and deduct the paying parent’s relievable pension contributions currently being made.
• Subsequently, the grossed-up school fees currently being paid should be subtracted from this figure.  The grossing-up is done by taking the figure paid for the school fees and dividing it by 0.55.  Mr. Justice Mostyn considered this step to be important as it would not be reasonable nor fair for the formula to be applied without such a deduction when these funds are, after tax, spent on the children’s school fees.
• Once these three calculations have been completed then the paying parent’s ‘Exigible Income’ is ascertained.

Step 3 – If the paying parent’s exigible income is £156,000 or less, then the CMS formula as set out above should be used.

Step 4 – For exigible income in excess of £156,0000, the AFM is then calculated by applying a tariff of 2.4% for a single child and 3% for each of two or three children.

Step 5 – If the exigible income is between £156,001 and £650,000 and there is no shared care then adjustments should be made.  If there is a 1/7th, 2/7ths, 3/7ths, or equal shared care then an adjustment will be made accordingly.

The bottom line

Although this may appear to be very complicated, the courts have provided a set of tables from which people are able to calculate the appropriate level of child maintenance. However, this formula and its usefulness is not always appropriate in certain circumstances. If the paying parent’s income is over £650k or if the paying parent is living off inherited wealth or they are living off capital then the formulas should both be discarded and the statutory principles should instead apply.

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