Income: Protected, Assessable and Exempt

Although there have been reforms relating to the way in which child support payments are calculated, any child support payments that were calculated in 2003 and before then are still classified as coming under the ‘old rules.’ These were very complicated calculations and took into account a large volume of information that sometimes resulted in surprising outcomes.

Under the old rules, there are several classes of income: protected, assessable and exempt income. These three classes of income are treated in different ways by the CSA under the old rules for maintenance calculations.

Exempt Income

Income is classed as exempt if it is necessary for essential expenses for the parent. This applies to both parents - resident and non-resident. The way the amount of exempt income is calculated is as follows:

• a personal allowance for single people over the age of 25 years
• an allowance for a child living with the parent (their own child)
• if there is such a child, a family premium
• a disabled premium for any qualifying child or parent
• a carer premium
• housing costs
• travel costs for the purpose of employment, if travel for work is over 240 km per week.

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Assessable Income

After basic living expenses have been deducted from a parent’s income, the rest of the income is assessable income. It is a portion of this remaining income that is used for the purpose of child support payments. If a parent is in receipt of benefits such as jobseeker’s allowance, income support or pension credit they are treated as not having any assessable income. Similarly, if a parent ‘with care’ is on working tax credit, they are treated as not having any assessable income.

The CSA does not take into account the non-resident parent’s partner’s income when calculating the amount of assessable income. If two people (the non-resident parent and his partner) work together, for example, in a joint business venture they will be treated as earning half of the total amount of income each.

Self employed non-resident parents’ income is calculated on taxable profits from self-employment. The CSA can demand a copy of the tax calculation notice (and any amendments thereto) for the purpose of obtaining the amount of assessable income. In the alternative, the parent can provide gross receipts instead. The calculation is then made by taking this figure and deducting tax, NI contributions, half of any pension premium, any VAT paid over that which has been received, and reasonable business expenses.

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Protected Income

Once a calculation for child maintenance has been made, a figure will be proposed that is the suggested maintenance payment for a particular parent. However, it is also the case that non-resident parents will never be made to pay more than 30% of their net income for the purposes of child support. If the proposed maintenance amount totals a greater percentage of net income than 30%, it will be reduced so that it does not exceed the 30% cap.

A further calculation that is made in terms of protected income is intended to prevent the non-resident parent and his family being left below the level of income support because of paying child maintenance.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Child Support Rights Checker lets you answer a few questions about your situation and get a clear summary of your child maintenance rights and options. Try it now →