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plclegal
plclegal, Barrister
Category: Family Law
Satisfied Customers: 8313
Experience:  Barrister at law
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From XXXXXXXXXXX I have recently gone through a divorce, the

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From XXXXXXXXXXX I have recently gone through a divorce, the terms of which were sealed by the courts in the form of a consent order. We have a small portfolio of properties that we rent out. The consent order stipulates that I had to give her properties and equity to the value of £596,000 and pay her £270,000 to buy her interests in my pension. The consent order stipulated that the sums were in full and final settlement of the divorce. My wife then made a claim for Child Maintenance for my three children on top of the settlement figure. I made contact with one of your experts and was told I would have to pay 19% of my gross pension. She now states she wants 19% of the gross rental income from the property. My concern is this, my gross rental income is about £37,000, however all the properties have mortgages and there are a lot of additional charges such as repair costs and tax that reduces my net rental income to about £8,500 per year. Is the child maintenance Service really able to take 19% of my rental income I can’t afford to pay the 19% on the gross rental income. Would you kindly advise please? Feel free to call or email me if you require more detailed information Dave Peer

Good morning.

My name is ***** ***** I specialise in family law. I’m happy to assist you today and I appreciate that is is important that you find a resolution as soon as possible.

Please note that our discussions on this site are for general information purposes and do not create an lawyer-client relationship. It is always recommended that you consult with a local solicitor for specific legal information.

I'll do my best to resolve this for you, please give me time to review your question and I will revert back to you shortly.

Customer: replied 9 days ago.
Thanks for your help

Can you tell me how you declare this income (through personal tax return or a ltd company) and how much you declare for income tax purposes?

Customer: replied 9 days ago.
I declare the income through A Self Assesment personal tax return. For the tax year 19 - 20 My rental profit £24,000, however now that the property portfolio has been split my future profit will be reduced.

Thank you for confirming.

In this case, the CMS (child maintenance service) are not going to calculate a liability on the basis of gross rental income, as the income that counts for assessment purposes when you are self employed is the amount declared in the SA tax return.

You should have the 2020 - 2021 figures to declare pretty soon, I would imagine?

This should form the basis of the assessment - and not gross rental income.

I hope that this assists? Can I clarify anything further for you about this today?

Customer: replied 9 days ago.
Thanks so I assume I will pay the 19% of the net rental profit after tax and other costs. You have been very helpful. I will still have to pay 19% of my gross pension I assume

Very happy to help.

As I understand it's the net profit figure but before tax is deducted, i.e. the taxable profit declared to HMRC.

If your pension and the rental profits form the totality of your income, it's a percentage of the overall income as I understand rather than one or the other.

This is lifted from their own guidance:

Unless a paying parent gets certain benefits, we work out child maintenance using their taxable gross annual income as the starting point.

By ‘income’, we mean earnings from employment, self-employment (profits from a business), occupational or personal pensions and certain benefits.

Gross annual income is the paying parent’s yearly income before Income Tax and National Insurance are taken off, but after occupational or personal pension scheme contributions are taken away.

So if you are still paying into a private pension, this would be deducted before your liability is worked out.

I hope that this clarifies the point for you?

Thank you for your enquiry today. I am happy to answer follow-up questions - please do get in touch with requests for extra information or further queries and I will do my best to help you.

plclegal and 2 other Family Law Specialists are ready to help you
Customer: replied 9 days ago.
Thanks, ***** ***** been told by HMRC that I am not considered to be self employed as I am living off rental income and a pension, no other earnings, does this cause a problem?

I don't think this causes an issue, your income is still calculable from the pension/ tax returns.

Thank you again for visiting JustAnswer, please do let me know if you have any additional questions in the future. I am also happy to answer any new questions on other topics that you may have, you can request me by putting “for PLCLEGAL” at the start of the new thread. Best wishes, Peter