Tax Years and CMS

Lets discuss the topic of CMS and the latest available tax year. While this might not be the most thrilling subject, I've noticed numerous online posts expressing confusion about CMS using the 21-22 tax year instead of the 22-23 tax year. Let's clear up this confusion.

But first, here is a related video.   

The CMS regulations mandate the use of your most recent taxable income figure as provided by HMRC. However, it's essential to understand that "latest available" doesn't necessarily mean the most recent tax year. Allow me to explain. For instance, even if today is in June, CMS might not be using your tax year that concluded on the 5th of April. There are a few reasons for this. If you're someone who does self-assessment, your tax return isn't due until January 31st. Even if you submit it earlier, HMRC's processes are geared towards finalizing tax years after the January 31st deadline. Consequently, the tax return might not be accessible before that date. This explains why CMS might use your 21-22 tax year in most instances, especially if you're a self-assessment taxpayer. If you're not involved in self-assessment and are a standard employee with no additional income sources, your tax year ends on April 5th. This means you'd expect to be billed for the 22-23 tax year in 2023. However, it's not this straightforward. The key is the latest available tax year from HMRC, and this isn't necessarily the tax year that just ended. For example, employers have to produce P11D forms, which contribute to your taxable income. However, their deadline isn't April 5th; it's typically later in June or possibly July. Consequently, there's a window of several months where your latest available tax year isn't the one that just ended. So, if your annual review is in June, you might be billed based on the 21-22 tax year. If we're in August, then the billing should shift to the 22-23 tax year. This shift in billing depends on whether you're a regular taxpayer or a self-assessment taxpayer. Keep in mind that CMS uses the latest available tax year from HMRC. This doesn't necessarily coincide with your most recent tax return submission, as HMRC's processes could still be ongoing. Unfortunately, there's no way to correct this on your own. Sending in your most recent tax return won't help, and it might even work against you due to tax thresholds. So, you'll need to accept the situation and remember that in a year's time, CMS will base their calculations on the next tax year. To clarify a couple of points, the tax year spans from April 6th to April 5th. Additionally, CMS relies on tax years because they provide a consistent view of income, avoiding wild fluctuations. Whether you're a seasonal worker or not, CMS aims to maintain income consistency for both parents involved in payments. To sum up, the most recent tax year used by CMS is the one supplied by HMRC, not necessarily the most recent one you've filed a tax return for. If you've filed your tax return early, hoping to skip a year, that strategy won't be effective. Conversely, if circumstances are the other way around, you won't pay a higher amount immediately, giving you time to save. I hope this explanation clarifies things. Have a pleasant evening and take care. Goodbye!

Stop CMS When Child Quits Education?

 Introduction

Good morning! I produced the video below in June 2022, but its still relevent today. During the summer months, many parents are grappling with the decision of whether to continue making child maintenance payments, especially now that some children have completed college and are either starting jobs or heading off to university. The answer to this question isn't entirely straightforward; it depends on a few factors that I'll explain, in the article and the video.

The Importance of Child Benefit Cut-Off Dates

To shed light on this matter, it's essential to grasp the significance of the child benefit cut-off dates. Suppose a child has been in education and has recently finished exams, perhaps around mid-June. In that case, the child benefit agency will continue to provide child benefit payments until September. Consequently, child maintenance payments will typically follow this timeline and be cut off around the same time. This practice is rooted in the observation that many students often return to college for further studies or take time to figure out their future path.

The Four HMRC Child Benefit Cut-Off Dates

Here's a piece of information that often escapes notice: child benefit has four cut-off dates throughout the year.

    28/29th February

    31st May

    31st August

    20th November. If these dates are a Sunday Child Benfit Stops. If not, it continues to the following Sunday which will be at the beginning of the next month.

So, let's get to the crux of the matter: if your child concludes their education before June and starts a job, child benefit should have ceased by 31st May, or a few days after. Conversely, if they finish their education after June 1st and subsequently become unemployed, child benefit will continue until the end of August with potentially covering the period up to around September 6th of the same year depending on when the first Sunday is from 31st August.

A Real-Life Example

Allow me to illustrate with a recent case I handled. In this scenario, a child completed their education in April, and the Child Maintenance Service was informed of this in May. However, the service still insisted on receiving child maintenance payments, citing the ongoing child benefit payments. A swift contact with the child benefit agency clarified matters. As it turned out, since the child had left education in April, child benefit should have completely stopped by June 1st. This clarification swiftly resolved the case.

Takeaway: Know the Cut-Off Dates

To sum it up, if your child wraps up their education before June and enters the workforce, the Child Maintenance Service should cease payments from June 1st. This is because child benefit payments should also have ceased. If, on the other hand, they leave education after June, the next crucial cut-off date is around September 4th or 5th.

Conclusion

I hope this explanation has shed light on the often-confusing issue of child maintenance payments. It's important to understand the interplay between child benefit cut-off dates and child maintenance payments to ensure that both parents and children are on the same page. Remember, if your child concludes their education before June, their path into the workforce should also mark the end of child maintenance payments. For those finishing education after June, expect child maintenance to continue until around September. If you have any more questions, feel free to reach out. Have a wonderful day, and I'll catch you later. Cheers!

Child Benefit and Child Maintenance

Navigating Child Benefit and Its Impact on the Child Maintenance Service

Child Benefit and Child Maintenance Whether you're a parent, grandparent, or caregiver, understanding the ins and outs of child benefit and its connection to the Child Maintenance Service (CMS) can prove to be invaluable. In this post, we'll delve into the qualifying criteria for child benefit, debunk some common misconceptions, explore the nuances of the former 50k rule, now 60K as of 2024. Shed light on terminal dates, and address the intriguing interplay between child benefit and CMS, where the CMS use the payment of child benefit to presume the primary carer. So, without further ado, let's dive into this essential topic.

Qualifying for Child Benefit: Child benefit is a financial support system designed to assist parents and caregivers in raising children. It's not solely limited to biological parents; even grandparents, foster parents, and adoptive caregivers can claim child benefits. One key aspect to remember is that only one individual can claim child benefit at any given time, for one child. Traditionally, it has often been claimed by mothers, but recent developments challenge this norm.

Dispelling the 50k Rule Misconception: The so-called "60k rule" concerning the clawback by tax of child benefit, has caused confusion for many. Contrary to popular belief, earning over 60k does not automatically disqualify you from claiming child benefit. The rule, introduced a few years ago, stipulates that if your income exceeds 60k but remains under 80k, a portion of the child benefit may need to be repaid. However, this doesn't mean you can't claim it. There's a third option: you can claim child benefit but opt not to receive it. By choosing this route, you avoid having to repay the benefit.

Terminal Dates and the School Calendar: Child benefit payments follow specific terminal dates throughout the year – end of May, August, November, and February. These dates may seem tied to the school year, but the connection isn't as straightforward as it seems. For instance, even if your child finishes school in May, child benefit continues until the end of August if they're still involved in educational activities. College attendance and changes in education status can impact when child benefit payments cease. Its slightly complicated further as Child Benefit is paid in weekly blocks, so although the 31st August is a Terminal Date, the Child Benefit will finish on the first immediate Sunday. So if the 31st August was a Friday, the Child Benefit would be payable for a further two days to cover the Child Benefit week which is Monday to Sunday.

Child Benefit and CMS: A Complex Interaction: While child benefit and CMS are interconnected, they operate on distinct criteria. CMS, based on shared care, calculates payments considering the child's overnights with each parent. Child benefit, however, focuses on day-to-day care. This creates a potential conflict, as one party might be receiving child benefit while CMS deems the other parent as the primary caregiver due to overnight arrangements.

The Intriguing Grandparent's Loophole: An interesting loophole emerges when a child who is already receiving child benefit has a child of their own. If the original recipient's circumstances change, their CMS payments may stop. However, if another relative, such as a grandparent, claims child benefit for the grandchild, CMS payments might continue despite the original recipient's change in circumstances.

Ethical and Legal Responsibility: It's essential to approach child benefit and CMS with honesty and responsibility. If your circumstances change and you're no longer eligible for child benefit, it's both morally and legally imperative to report this change to HMRC. Failing to do so can lead to serious repercussions down the line. Remember that any child maintenance paid based on inaccurate information might need to be repaid.

Change of Carer: It is common for there to be a change of carer reorted to CMS. Equally it is also common for the change of carer to be rejected due to a challenge or a lack of evidence. CMS used the payment of Child Benefit to evidence the pruimary carer. So if that changes, the records with the Child Benefit Agency need to reflect the change. Therefore where parents change from being carers, the new primary carer must make an application to the Child Benefit Agency to claim the Child Benefit. If they dont its highly likely that the CMS will reject the change. In my own experience, when both parents stated the child was not in education, CMS still ran a child benefit check, and would not initially stop the CMS payments due to Child Benefit being paid, even though both parents said the child had ceased to be in education.

Conclusion:

Understanding the intricacies of child benefit and its relationship with the Child Maintenance Service is crucial for any parent or caregiver. Whether you're clarifying the 60k rule, navigating terminal dates, or pondering the ethical implications of claiming child benefit, being well-informed empowers you to make the best choices for your family's financial well-being. As regulations and laws continue to evolve, staying up-to-date with the latest information ensures you're equipped to make informed decisions.

We hope this blog post has shed light on the complex yet vital topic of child benefit and its impact on the Child Maintenance Service. If you have any questions or insights to share, feel free to leave a comment below. And if you found this post helpful, remember to like, subscribe, and share it with others who might benefit from this information. Thank you for joining us on this journey of understanding child benefit and CMS. Wishing you all the best in your parenting and caregiving endeavors! For clarity, this post relates to the Child Maintenance Service and the payment of Child Benefit in the United Kingdom. Further Information: Child maintenance can be a complex topic to navigate, especially when it comes to understanding what it covers and what it doesn't. If you're new to this blog, don't forget to join us on Youtube. Out Youtube Channel can be subscribed to at: https://www.youtube.com/channel/UCmKdH63SQdlSqqFwkc4hAKQ?sub_confirmation=1 Please like and subscribe to receive future videos on similar topics right in your YouTube inbox. This article was updated in 2024 due to the government changing the 50K threshold to 60K.