Divorce finances in a nutshell

How to arrange financial support after you separate.

Have you recently separated from your partner? We know that one of the most worrying things for anyone during a separation is the finances. The most important thing to remember is that a Decree Absolute (final stage of divorce) should not be applied for until the family finances have been agreed or ordered by the court.

What can I expect?

When separating, there are two forms of periodical payments that can be agreed between couples.  Spousal Maintenance (paid to one partner when the other can’t financially support themselves without it or if they have not worked throughout a period of the marriage) and Child Maintenance.

There are many financial orders a court can make depending on individual circumstances, but here we will look at the two most common orders.

Related: How to get a divorce

Spousal maintenance

Usually paid monthly and continues for a defined period of time or for the remainder of the parties’ life (a “joint lives order”).

It ends if the recipient remarries or if either party dies. It can be varied or dismissed by the courts if there is any significant change in circumstance.

Cohabitation can also be a trigger point for spousal maintenance to be reduced or stop but this is not automatic as cohabitants do not have the same financial claim against one another in the event of the relationship breaking down.

When the court is deciding how much spousal maintenance to order and how long it will be paid for, it looks at the overall circumstances of the parties.  Their financial commitments, and child maintenance obligations, and how these will be met.  Every situation is different and needs to be looked at on a case-by-case basis.

As the court has a duty to dismiss the financial obligations between parties as soon as possible, (a clean break), in some circumstances it may order a short period of spousal maintenance to enable one party to move towards financial independence.  This is known as a term order.

There is no set calculation for working out how much spousal maintenance should be paid and again, depends of individual circumstances.

Child Maintenance

Parents are strongly encouraged to try and reach agreement about the amount of support that is appropriate for the children between themselves under the new Child Maintenance and Other Payments Act 2008, and an assessment by the Child Maintenance Service (CMS) is seen as a last resort.

With child support, this is not something that the courts usually deal with anymore, unless there is a financial consent order made, and under the following circumstances, a court order can be made:

  • If the couple have a high net worth and the income exceeds the amount for assessment under the Child Support Act 1991, (£3,000 gross weekly income)
  • Payment of school fees and other educational expenses.
  • Expenses arising if the child has a disability.
  • Financial support for young children age 20 and over if they are in full-time education.
  • A lump sum or cash order or orders to meet specific needs of the child.
  • Provision for housing – although if funds are made available to buy a house the house will remain the asset of the payer and the payer will be able to sell the property once the child finishes full-time education.
  • Top up child support
  • Child support if both parents agree to the court making an order. If both parents do not agree to the court making an order the court does not have the power to order child support.

However, you must be aware that after a court order has been in place for a year either parent can make an application to the Child Maintenance Service. Any assessment by the CMS will then override the court order. This issue must be carefully considered if the paying parent has agreed to pay more than the likely Child Maintenance Service award as part of a financial settlement.

How is Child Maintenance calculated?

Unless a paying parent receives certain benefits, the CMS will work out the weekly child maintenance amount they should pay using their taxable gross annual income. This includes earnings from employment, self-employment (profits from a business), occupational or personal pensions and certain benefits. The parent who does not have the day-to-day care pays child maintenance to the parent or person who does.

The CMS applies a standard formula to calculate how much the absent or paying parent should pay and an application can be made at any time and so it is in each person’s  interests to have an idea of the likely calculation even if they choose not to use it at present.

Gross income formula for new applications 

If the paying parent’s gross income is less than £100 per week a flat rate of £7 applies. If the paying parent is a full-time student then a nil rate applies. There is a reduced rate for those who earn between £100 to 200 per week.

On income between £200 – 800 the percentages are:

  • 12% for one qualifying child
  • 16% for two
  • 19% for three or more

On income between £800-3000 the percentage is:

  • 9% for one child
  • 12% for two
  • 15% for three or more.

Gross income is the amount upon which the paying party was charged to tax.  Pension contributions are deducted unless they are excessive. If a paying parent has a child in their household there is a reduction of 11% for one child, 14% for two and 16% for three or more. Income over £156,000 will be exempt although an application to the court could be made for a top-up order.

Income that is not considered is: child benefit, housing benefit and council tax benefit, income for maintenance and capital, and payment to part-time territorial and reserve forces.

To deter parents using the CMS a £20 application fee has been introduced to encourage applicants to consider whether a family-based arrangement is possible. If the collection service is used (the CMS collect the money on your behalf) a 20% charge is to be added to the amount to be paid, and 7% will be deducted from the payment before it reaches the parent with care. There is also the option of Direct Pay when the amount is worked out for the parents, but the CMS will not be involved in enforcement.

What if we share the care?

If the paying parent provides overnight care for a child for at least 52 nights a year, an adjustment is made to the amount of child maintenance due. The 52 nights care does not need to be one night a week throughout the year. They could, for example, be spent in blocks of weeks.

The child maintenance payable to the receiving parent will be reduced as follows:

52-103 nights 1/7

104-155 nights 2/7

156-174 nights 3/7

If there are 175+ nights you take off 50% and a further £7 per week per child.

Useful links:

 Child Maintenance Options

Telephone: 0800 953 0191

Monday to Friday, 8am to 8pm

Calls to these numbers are free from mobiles and landlines.

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