Published June 2023. Last updated May 2026 | By Katie McCann, Barrister and Managing Partner of Lowry Legal.
One of the main considerations of any divorce or separation is the ongoing welfare of children. Along with living arrangements, one of the most pressing factors to be decided will be the value of monthly child maintenance to be contributed by the paying parent. Calculating this contribution is often more straightforward when a fixed salary is the sole source of income — but it can become more complex when the non-resident’s earnings include the likes of share dividends.
To better understand the topic of child maintenance and dividends it’s useful to first understand what child maintenance can include, how it is calculated, and how less typical forms of income are assessed by the Child Maintenance Service (CMS).
What is Child Maintenance and How is It Calculated?
Child maintenance (also called child support) refers to regular payments made by a non-resident parent to support their child’s financial needs. Payment of child maintenance is not generally determined by the court following divorce as it is usually handled between the parents and the CMS. If outside the remit of the CMS, the courts will intervene.
Who Handles Child Maintenance?
- Parents: A family-based agreement is often the quickest route to resolution — and can be made informally between parents.
- CMS: If an agreement isn’t practical, parents can apply for a legally enforceable CMS calculation.
- The Courts: Some cases fall outside the CMS’s remit and require court intervention.
In most cases a child support lawyer will encourage parents to reach their own (non-binding) family-based agreement independently. It’s also possible to include the details of child maintenance in a divorce consent order, which would prohibit an application to the CMS for at least 12 months from the date of the order.
When Does the CMS Not Apply?
Although most cases go through the CMS, it’s important to note that there are some scenarios in which they would not be able to intervene. The following situations fall outside of the remit of the CMS, so would instead be looked at by the courts:
- High-Income Cases: If the paying parent earns over £156,000 per year, the CMS will only assess income up to this threshold — any additional payments must be arranged through the courts.
- One Parent Lives Overseas: CMS cannot enforce payments if one parent lives abroad (except for UK government employees like diplomats and military personnel).
- Special Expenses: School fees, higher education costs, or special needs expenses must be settled privately or via court orders.
If you are in any way unsure about potential exceptions to maintenance payments, it’s advisable that you discuss your circumstances with a legal professional who can advise on finances after separation.
How Does the CMS Calculate Child Maintenance?
The amount that the paying parent must contribute is mainly determined by how much gross pay is declared to HMRC. Other factors that will be considered include any additional income, the number of children, the amount of shared residential time, and more. The CMS calculates maintenance payments using six steps. They are:
- Check Gross Income: The CMS gets income details from HMRC tax records.
- Factor in Other Income: Pensions, state benefits, and additional earnings are considered.
- Apply a Maintenance Rate: One of five maintenance bands* is assigned (from ‘default’ to ‘basic’).
- Account for Other Dependents: Other children receiving maintenance affect calculations.
- Final Calculation: The maintenance figure is determined.
- Adjust for Shared Care: Time spent with the paying parent reduces payments accordingly.
*The maintenance rates discussed in step three are as follows:
| Rate | Income Threshold | Payment |
|---|---|---|
| Nil | Below £7/week | No maintenance due |
| Flat | £7–£100/week, or paying parent receives benefits | £7/week |
| Reduced | £100–£200/week | £5 flat fee plus a percentage of gross weekly income |
| Basic | £200+/week | Calculated across two brackets: £200–£800 and £800.01–£3,000.
Earnings above £3,000 per week are not considered. |
If the CMS is unable to establish gross weekly income, a default rate applies: £38/week for one child, £51/week for two children, and £64/week for three or more children.
As you can see, these calculations are based on gross taxable income, so don’t cover all eventualities. However, other sources of income aren’t automatically included in weekly maintenance contributions. If you would like to check maintenance payments, you can do so using the official government calculator.
Notional Income From Assets: The £31,250 Rule
A paying parent cannot simply point to a modest salary as the full picture if they hold significant assets that are not generating an obvious return. Where those assets exceed £31,250, the CMS can attribute a notional income to them.
Specifically, where a paying parent holds an asset worth over £31,250 that is not generating any return, the CMS may assume that it has the potential to generate an income of 8% per year. They will then include that figure in the maintenance calculation.
This can apply to savings, investments, and certain other assets, but the paying parent’s primary residence is specifically excluded.
The rule in practice: A paying parent holds £100,000 in a savings account generating no interest. The CMS attributes a notional annual income of £8,000 to that asset and factors it into the maintenance assessment. It does not matter that no income has actually been received.
What you can do: If you believe your former partner holds substantial assets that are not reflected in their CMS assessment, you can pursue a variation application on grounds of notional income.
To do this, legally gather evidence of the assets in question, such as bank statements, investment records, and Companies House filings. Once complete, submit a variation request to the CMS with a clear explanation of the grounds.
Are Dividends Included in Child Maintenance Calculations?
Dividends may not be included in the initial assessment as, depending on when they were declared, they may not show on the relevant tax return. However, they do represent a relevant source of income and will be taken into account. The paying parent should ensure that their income is recorded accurately to avoid action being taken against them.
If the non-paying parent wishes for undisclosed investment earnings to be taken into account, it’s possible to recalculate child maintenance and dividends payments by requesting a variation. It can take up to three months for the adjustment to be applied.
Therefore, either the paying or receiving parent can ask for a variation based on a number of reasons. When it comes to child maintenance and dividends, these are included with the likes of rental income, stocks, and other high value investments.
What if a Director Spouse Suppresses Dividends to Reduce Maintenance?
The CMS has specific powers to look behind artificial income structures and treat diverted income as if it had been paid directly to the paying parent, regardless of how the company is arranged.
A parent who owns or controls their own company has flexibility over how and when they pay themselves. This can create an opportunity to reduce the income that appears in a CMS calculation.
Common tactics, collectively known as “income diversion” include:
- Taking a minimum salary while retaining profits within the business.
- Transferring shares to a new partner or family member to split dividend income.
- Deferring dividend payments until after the maintenance period ends.
When the CMS believes this is happening, it assesses maintenance based on what the paying parent could reasonably have received. Not what they chose to declare.
Relevant Case: AS v Secretary of State:
This principle was tested directly when a father transferred 40% of his company shares to his new wife shortly after separation. The tribunal found that he had voluntarily and unreasonably diverted his income, and upheld a higher maintenance figure than his remaining shareholding would otherwise have produced. It is a clear illustration that restructuring a business around the time of separation will attract scrutiny.
What You Can Do
If you suspect your former partner is manipulating their business income, a variation application to the CMS on grounds of income diversion is the appropriate first step. If the CMS does not act, the matter can be referred to the Financial Investigations Unit (FIU). A specialist body within the DWP, the FIU retains powers to investigate complex cases using HMRC records and other financial sources.
How to Request a Child Maintenance Variation for Hidden Income
If you believe that the CMS assessment does not reflect your former partner’s true income — whether because of undisclosed dividends, diverted income, or assets not generating an obvious return — you can apply to the CMS for a variation at any time. The receiving parent, the paying parent, or their respective solicitors can all initiate the process.
The main grounds for a variation relevant to dividend and investment income are:
- Additional Income: Covering unearned income such as dividends and investment returns. This must amount to at least £2,500 per year to qualify.
- Notional Income From Assets: Where the paying parent holds assets worth over £31,250 that are not producing a return.
- Diversion of Income: Where the paying parent is believed to be redirecting income to reduce their apparent earnings, i.e., through share transfers, inflated family member salaries, or excessive pension contributions.
To make a variation application, gather as much supporting evidence as possible. Only attempt to gather information you are entitled to access.
Relevant documentation usually includes:
- Companies House records.
- Filed accounts.
- Tax returns.
- Bank statements.
Next, submit your application to the CMS with a clear explanation of the grounds. If they reject the variation, you have 30 days to request a mandatory reconsideration. If that is also rejected, the matter can be appealed to an independent First-Tier Tribunal, which has broader powers to demand financial information than the CMS itself.
If you are unsure about any aspect of these payments, it’s advisable that you enlist the services of a solicitor for child maintenance as soon as possible. Thorough and comprehensive advice about this difficult subject could provide peace of mind, both for now and the years to come.
Lowry Legal: The Experts in Child Maintenance and Settlements
Lowry Legal is an experienced law firm with an exemplary record of representing high net worth clients. We realise that resolving issues of child maintenance and dividends can sometimes be challenging, so we will take steps to ensure that you understand all of your available options ahead of dealing with the CMS.
Our specialism in complex financial cases, can help to ensure that child maintenance calculations accurately reflect all sources of income, including dividends, investments, and business profits. We can handle high net worth child maintenance disputes, challenge unfair CMS calculations and hidden assets, and provide tailored legal strategies for financial settlements.
Need expert guidance? Contact us today or email enquiries@lowrylegal.co.uk for further advice.
