Notional income variation

Hopefully not a hijack.

Under the financial order (which went to court) the home was sold & money's paid.

After paying debts, and putting aside some money for the children's trust funds/junior isa I will have around £35k which I had planned to put into an isa (£20k now, rest after 6th April)

Just caught this thread and worried CMS will be after that as well!

Any advice on best way to proceed with my savings? It's short term to hopefully help me buy my own place. But I'm not ready for that yet.

I would get some financial advice, but it does seem like you could be caught by CMS until you actually buy your new home

If you assume the worst and say CMS will assess you on the full £35k (and I'm not sure they do), 8% (assumed return) works out at £2800 per year, and then depending on how many children, you will be assessed up to 20% of this, so £560 per year or about £45 per month. This is worst case figures, so if you are intending to buy a house in the nearish future, then the child maintenance on your savings isn't actually going to cost a lot. 

Posted by: @actd

If you assume the worst and say CMS will assess you on the full £35k (and I'm not sure they do), 8% (assumed return) works out at £2800 per year, and then depending on how many children, you will be assessed up to 20% of this, so £560 per year or about £45 per month. This is worst case figures, so if you are intending to buy a house in the nearish future, then the child maintenance on your savings isn't actually going to cost a lot. 

8% return? I wish!

Yes hoping its short term, but as its a high figure so HMRC will be aware, can see them demanding yet more money. 

Given its from a court order, can't see how she can get that as well - as the extra isn't for kids, but to benefit her ultimately. She already gets £800/month! 

Ah, if it's all by court order, then no, I don't think you need to worry. It's only if it's by CMS that it would be re-assessed.

Posted by: @mrwhytes

@Daddyup 

What percentage does CMS consider to be ok for each age range before it is classed as diversion of income please? Do you have any link to this info?

@mrwhytes @actd

This link is to a comprehensive document dealing with all different kinds of variation, Chapter 36 deals with diversion of incomee :-

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1066233/volume-3-variations.pdf

One specific way to divert income is via additional pension contributions - for this specific method there are threshold values in para 36014 which detail what is an 'acceptable' level of pension contribution based on % of income and your age. However note that the age in this table is when you started making pension contributions - and I think this is often misunderstood even by CMS themselves as your current age. In any case I think this table is almost unusable in my view because you may have stopped and started contributions throughout your working life - and para 36012 bullet 7 refers to this as a consideration.

Para 36019 states that the Decision Maker should initially refer to para 36014, but in complex cases (or where either party disputes the decision) the table in para 36020 should be used instead. This is much easier to apply and depends on your current projected pension income and your current income.

Posted by: @nx1977

Hopefully not a hijack.

 

Under the financial order (which went to court) the home was sold & money's paid.

 

After paying debts, and putting aside some money for the children's trust funds/junior isa I will have around £35k which I had planned to put into an isa (£20k now, rest after 6th April)

 

Just caught this thread and worried CMS will be after that as well!

 

Any advice on best way to proceed with my savings? It's short term to hopefully help me buy my own place. But I'm not ready for that yet.

@nx1977

The rules state that the £31,250 threshold applies to each individual asset. So £35,000 in one place (eg. a current account, or an ISA or whatever) would qualify for inclusion in a notional income calculation (should the other party request one). However £20k in one place and £15k in another place (eg. one in a NatWest current account and the other in a HSBC account or ISA or something) - neither exceeds the threshold and neither would be eligible for inclusion in a notional income calculation.

Take a look at the link

https://www.gov.uk/government/publications/child-maintenance-decision-makers-guide

It gives examples of what are eligible assets

@mysterytrip 

Hi, I’ve just been reading this post as I’m think about buying a buy to let but the more I’m reading it the more I’m put off.

can you tell me if I’m correct with what I’ll need to pay if I do get a buy to let please.

if I take £35k out of my property that I live in permanently and use that as a deposit on a buy to let will I have to pay 8% of £35k for child maintenance?

Also I think my child maintenance will increase as the rent from the buy to let will add up to £9300 a year which is more than a 25% increase in what I’m earning at the moment, obviously £9300 is not my profit as I’ll have the mortgage to pay and other costs but I’m sure that the CMS will use the whole rent as an income (£9300).

If I have to pay 8% of the asset (£35K deposit on the buy to let)

Plus the child maintenance will expect me to pay more because of the income from the rental on top of what I’m already paying then it’s not worth doing as once I’ve paid my own tax and then capital gains there will be nothing left.

sorry if I haven’t explained it very well but any help will be much appreciated.

@gbt165 Hi, I understand that CMS don’t have to take that 8% off you as well as the additional income from your rental money. But it’s within their discretion.

One point that might have slipped your radar and can be confusing: you mention that you would be liable to pay a percentage of your income as ‘additional income’ because the rental money would increase your earnings by 25% or more. This 25% threshold is only relevant where changes to income occur during the year between CMS annual assessments. When the next annual CMS assessment happens, and presuming you’ve declared your rental income to HMRC, your rental income will be taken into account and your child’s mother will be given a percentage (12%, 18% or whatever) of that rental income. The 25% threshold is largely unimportant, all income gets reassessed annually and any change (whether 1% or 25%) is taken into account at the review.

@bruceout

thanks for that Bruce, it all gets very complicated as I thought that they only adjusted the payments if there was a 25% difference.

I understand now that they’ll adjust it once my review is done every year.

knowing my luck CMS will make me pay for a percentage of my buy to let deposit (asset) along with the rental income so I’ll have to think very carefully before I make a decision on the buy to let,

thanks again for your reply 👍

@gbt165 Just adding. I believe your ex will need to apply for a variation taking your assets into account, CMS will not do it without. So if your BTL is not on her radar then she likely wont be asking for assets to be included.

CMS told me this year that some share options I was given by my company will be treated as assets, not income. And they did not feature in my reassessment, even though they knew about them.