The UK's 25% Rule to RIP OFF Dads (Child Maintenance Service)

The Child Maintenance Service's 25% Rule: Everything You Need To Know
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Summary of Child Maintenance Service 25% rule explained.

Hey there, let's discuss the 25 rule, a common source of confusion. The rule is quite straightforward: your income must change by 25 percent in order for the CMS (Child Maintenance Service) to adjust its calculations. Here's how it works:

When you open a case with the CMS, they use your most recent tax year to calculate the percentage of your salary that goes towards CMS payments. A year later, they conduct an annual review using your salary from the next tax year to determine your current earnings. Typically, if your salary remains consistent or increases by a small percentage each year (e.g., 3 percent), the CMS payments will also stay the same or slightly increase each year.

Now, the 25 rule only applies during the current year and doesn't form the basis of the annual review calculation. Let's look at a couple of scenarios to clarify this:

Person A earns £10,000 per year, and their salary increases to £12,000 per year. Since this is not a 25 percent change, the CMS calculations will remain unchanged for the rest of the year. However, the increased salary will be reflected in the following year's CMS payments.

Person B earns £20,000 per year but receives a pay raise to £30,000 per year. As this is more than a 25 percent increase, the CMS should be recalculated at that point, and payments will increase for the remainder of the year.

You don't need to worry about notifying the CMS for small changes in income, such as an annual bonus, unless it amounts to a 25 percent change in your yearly salary. The same applies if you experience a decrease in earnings-it has to be a 25 percent drop for it to affect the CMS payments.

During the COVID-19 period, some people faced reduced salaries, often by 20 percent, with the government making up the rest. In such cases, CMS payments did not change. However, if someone's salary dropped to 50 percent due to reduced hours without government support, their CMS payments should have decreased accordingly.

To sum it up, the 25 rule only applies to changes during the current year and doesn't influence the annual review. Be cautious about reporting income changes to the CMS unless they meet the 25 percent threshold. Also, keep in mind that increases or decreases in earnings should be measured over a 12-week period, as anything less might be considered temporary by the CMS. I hope this clarifies things and makes your interactions with the CMS easier.

#csa #childmaintenanceuk #childmaintenanceservice

Chapters
00:00 Introduction
00:21 What is the CMS 25% rule
01:04 Why does the CMS have a 25% rule?
01:28 How does the 25% rule workout?
03:12 Recap
03:31 Beware this 25% trap!
04:39 Final Summary of this CMS video

#cms #csa #childsupport #childmaintenance #childmaintenanceuk #childmaintenanceservice #childsupport2024 #childsupport2023 #dwp #hmrc