## The basics of the new formula## SummaryThe new formula isn't quite as simple as it is often made out to be, but there are very few things that are taken into account. It uses just the following 4 items: 1: NRP's net income (see below). ## Net incomeThe net income starts as gross income, then all income tax, all National Insurance, and ALL contributions to pension schemes are subtracted. The formula ignores all net income above £2000 pw. If the household claims a tax credit such as WFTC, then the amount of the tax credit that is treated as net income is: A: if the NRP is alone or earns most, 100%. The CSA can find this tax credit information from the Inland Revenue directly, and in fact the CSA rules talk about "who earns most at the time of the tax credit claim" to ensure this. ## Basic calculationThe calculation is approximately as follows. The formula starts by reducing the net income by 15% or 20% or 25% if there are 1 or 2 or 3-or-more relevant children. Then the formula calculates 15% or 20% or 25% of the remainder if there are 1 or 2 or 3-or-more qualifying children. Finally, the amount is reduced by 1/7th or 2/7th or 3/7th or half if the NRP shares care at least 1 night or 2 nights or 3 nights per week or half the time, respectively. In the latter case, the calculation also reduces by £7 per qualifying child. But the minimum in all such cases is £5 per week. There are safeguards for people with net incomes of less than £200 per week. At £100 per week or less, the amount is simply £5. (Or even £0 in some benefit cases). Between £100 pw and £200 pw, the amount rises towards the above formula, and these amounts will be less than the standard 15 % / 20% / 25%. These percentages only come into play properly at £200 pw and beyond. ## RefinementsIf there are multiple PWCs, the amount is paid to them according to the proportion of the children each has. So if one has 1 child and another has 2, they will get 1/3rd and 2/3rd of the amount respectively. There are "variations", a new name for "departures". Either party can ask for a variation, but the rules are intended to make them fairly rare by setting qualifying conditions. One important case is where the calculation is at odds with the NRP's lifestyle. In this case, the NRP's partner's income or assets are only relevant if the NRP "controls" them, otherwise they are ignored. Later articles discuss default payments, penalties, more about variations, and other complications. ## ReferencesDetails of the formula: |

Page last updated: 17 December, 2003 | © Copyright Barry Pearson 2003 |