Child maintenance self employed parents are assessed on is not what lands in your bank account, what you draw from the business, or what your lifestyle costs. It is one number: the taxable profit HM Revenue and Customs (HMRC) holds from your self-assessment. This guide explains how that figure is used, works a full example, and then takes on the company-director version of the same question — the small salary topped up with dividends — where the gap between the starting figure and the varied one can run to thousands of pounds a year.

The rule: taxable profit, latest complete tax year

For a self employed child maintenance case, the Child Maintenance Service (CMS) asks HMRC for your gross annual income, and for a sole trader or partner that is your taxable profit for the latest complete tax year — total income from the business minus allowable expenses, before income tax and National Insurance are taken off. Two consequences follow. First, the figure lags reality: this year’s assessment usually runs on last year’s filed profit. Second, cash you leave in the business still counts — profit is profit whether you drew it or not — while money you draw beyond the profit is not income for this purpose at all.

The worked example: £45,000 of profit, one child

Take a sole trader with a taxable profit of £45,000 and one child they pay maintenance for, no shared care. The CMS converts the annual figure to a weekly one: £45,000 a year is £865.38 a week. That lands in the basic plus band, so the first £800 is charged at 12% (£96.00) and the remaining £65.38 at 9% — giving £101.88 a week, £441.50 a month, £5,298.00 a year. The same profit with two children (16% and 12%) or with overnight stays would run through the same steps as any employee’s case: the method does not change for the self-employed, only the income figure fed into it.

What counts, and what does not

The profit figure is the one your self-assessment computes: business income minus the expenses the tax rules allow, including the effect of capital allowances as filed. It is not turnover, and it is not the balance of the business account. If you have more than one income source — a part-time job alongside the business, a partnership share alongside sole-trader work — the starting point is your total taxable income across all of them, because that is the figure HMRC holds and the figure the service asks for: employment earnings, self-employed profits, occupational or personal pensions and certain taxable benefits, added together, with pension contributions then taken back off. A partner’s share of partnership profit counts in the same way as a sole trader’s whole profit. What never enters the main calculation is money that is not taxable income of yours — a loan, an inheritance sitting in an account, a partner’s earnings. Assets and non-taxed income have their own route in, through the variation grounds, and the thresholds for that route (£2,500 a year of unearned income; assets of £31,250 or more) are set out in the directors section below.

Children change the percentage, not the basis: the same £45,000 profit with two children to pay for runs at 16% on the first £800 and 12% above it, giving £135.85 a week (£7,064.00 a year) before any shared-care reduction. And overnight stays reduce a self-employed parent’s payment in exactly the same sevenths as an employee’s — the scheme distinguishes parents by where their income figure comes from, and by nothing else.

When the profit figure is out of date

Self-employed income moves around more than a salary, and the scheme has two pressure valves. The first is time: every case gets an annual review against the newest HMRC figures, so a bad year feeds through at the next review. The second is the 25% rule: if your current income differs from the figure being used by 25% or more — a lost contract, a business that has taken off — either parent can ask the service to use current income instead, supported by evidence such as an up-to-date self-assessment. What you cannot do is pick your best or worst month: the service works in whole tax years, and estimates you supply have to be a single taxable gross figure.

Company directors: salary, dividends, and the £4,245.90 gap

The sharpest version of self employed and child maintenance is the director who pays themselves a small salary and takes the rest as dividends. Suppose the salary is £12,570 and dividends are £37,500 — £50,070 of real income. If the HMRC figure the service starts from reflects the salary alone, the calculation is modest: £12,570 a year is £241.73 a week, and 12% of that for one child is £29.01 a week. But dividends are exactly what the variation system exists for. A receiving parent can apply for a variation on two grounds that fit this pattern: unearned income — dividends, interest and rental income of at least £2,500 a year — and diversion of income, where a parent who controls how they are paid arranges it so income misses the calculation. Count the full £50,070 and the same case runs: £962.88 a week, 12% of the first £800 plus 9% of the rest — £110.66 a week. The difference between the two outcomes is £4,245.90 a year. A variation is not automatic — the service shares the application with the other parent and must consider whether granting it is just and equitable — but the route is a designed part of the scheme, not a loophole in it. Assets point the same way: the service can also be asked to work out a notional income from assets worth £31,250 or more.

Two traps the profit basis sets

The lag trap. Because the assessment runs on the latest filed tax year, a business that has fallen off a cliff is initially assessed on its good year. Suppose profit drops from £45,000 to £28,000. Assessed on £28,000, one child would be £64.62 a week — but until the new figure lands, the £101.88-a-week assessment from the £45,000 year stands. The escape is the 25% rule: a fall from £45,000 to £28,000 is a drop of nearly 38%, well past the threshold, so the parent can ask for the current figure to be used now rather than at the next annual review — with evidence, and the change then applies from when it happened. The same door swings the other way: a receiving parent who knows profits have jumped can ask for the current figure too.

The expenses trap. Because the measure is profit, every allowable expense claimed on the tax return lowers the maintenance basis as surely as it lowers the tax bill — and every expense not claimed raises both. The exchange rate is exact: at the 12% basic rate, £5,000 of profit is worth £11.54 a week of maintenance, £600 a year. Nothing about that is improper — legitimate expenses are legitimate — but it means the self-assessment is doing double duty, and errors or aggression in it move the maintenance figure in a way a salaried parent’s payslip never could. It is also why the service checks the HMRC figure rather than a figure the parent offers, and why a receiving parent who believes the filed profit does not reflect reality has the variation and reconsideration routes rather than an argument.

The legacy phrasing: csa self employed

Searches for csa self employed treatment are asking about a closed scheme, but the comparison is instructive. Under the CSA’s 2003 scheme, a self-employed parent was assessed on net profit — after tax — at 15%, 20% or 25% depending on the children. The CMS uses gross taxable profit at 12%, 16% or 19%: the base went up, the percentages came down, and the two systems’ answers for the same business rarely match. Anyone whose arrangements were set in the CSA era and never revisited is working from numbers the current scheme would not produce — one more reason the calculation is worth re-running under today’s rules.

Records that make the case go smoothly

Keep your self-assessment filings complete and on time, because the filed profit is the assessment until something displaces it. If you pay into a private pension, tell the service: contributions reduce the counted income and are not always visible in the starting figure. If your income changes materially mid-year, report it rather than waiting for the annual review — changes can be backdated to when they happened, which cuts both ways. And if you are the receiving parent of a director whose declared salary looks nothing like their spending, the variation grounds above — unearned income and diversion — are the mechanism the scheme gives you.

Open the Child Maintenance Calculator