Child Maintenance for Company Directors: Do Dividends Count?

Part of: Child Maintenance Lawyer

Child maintenance for company directors starts from the salary the director draws, so a director who pays themselves a small salary and takes the rest as dividends can end up with a Child Maintenance Service figure that looks far too low. The rest of the money is not out of reach. A variation can bring in dividends, and profit sent elsewhere, but only when a parent asks for one and backs it with evidence. Timing matters too. Asked for after the CMS has set the figure, a variation usually runs only from the day someone asked, and every month before that stays on salary alone. This guide explains how that works under the law of England and Wales, for the parent who receives maintenance and for the director who pays it. For the rates and bands themselves, use our child maintenance calculator.

How the CMS works out child maintenance for company directors

The CMS asks HMRC for one figure: the income HMRC taxed for the latest available tax year, under four headings only. Those are employment income, pension income, certain benefits and trading profit. Where HMRC holds both a self-assessment return and payroll information, the figure comes from the return (Child Support Maintenance Calculation Regulations 2012, reg. 36).

A director holds an office, and the tax rules on employment apply to offices too (Income Tax (Earnings and Pensions) Act 2003, s.5), so the salary is in. Dividends are not. HMRC taxes them as dividends from a UK company under Part 4 of the Income Tax (Trading and Other Income) Act 2005, and regulation 36 does not list that Part. Profit the company keeps is not the director’s income at all until the company pays it out.

So the gap between what the company makes and what the CMS sees comes down to one choice. The director decides how the money leaves the company. Two directors running the same business can produce very different figures. For the parent receiving maintenance, the first letter from the CMS is often the start of the argument rather than the end of it.

Do dividends count as income for child maintenance?

Yes, once the CMS agrees a variation. Where a paying parent’s unearned income is £2,500 a year or more, the CMS can treat it as extra weekly income (reg. 69). Unearned income means income taxed as property income, savings and investment income or miscellaneous income. Dividends therefore count alongside rent and interest, and it is the total that has to reach £2,500.

The amount comes from HMRC for the latest available tax year. The CMS divides that yearly figure by 365, multiplies it by 7 and adds the result to the director’s weekly income before the usual percentage goes on. If HMRC’s latest year is out of date, or holds nothing from a self-assessment return, the CMS can use the most recent tax year instead. It needs enough evidence to do so (reg. 69(5)). At each annual review the CMS can ask HMRC for the newer figure and update the variation from the review date (reg. 21).

Two limits apply. First, the CMS still caps gross weekly income at £3,000 after adding the extra income (reg. 73(1)), so a director above that level needs a court for anything more, through a top-up maintenance order. Second, this ground only reaches dividends the company actually paid. Profit the company kept is a separate argument.

CMS diversion of income: when company profit counts for child maintenance

The CMS can add it back when two things are true. The director must be able to control, directly or indirectly, how much income they receive. They must also have unreasonably reduced that income by diverting it to other people or to other purposes (reg. 71). Where both apply, the CMS adds back the whole amount of the reduction.

A director who owns and runs their company usually has that control, so the argument tends to turn on the second test. GOV.UK gives two examples of diverting income: giving it to someone else, and choosing a company car instead of a higher salary. In director cases the same patterns come up again and again.

• Profit left in the company. The company holds back money it would ordinarily have paid out.
• A new partner or relative paid by the company. A salary or dividends go to someone who does little work for it. Our write-up of a father who transferred shares to his new wife shows how a tribunal looked at one of these.
• Perks instead of pay. The company provides a car or other benefits in place of salary.

The word that decides these cases is “unreasonably”. A company can have good reasons to hold cash, such as a tax bill falling due or a contract that pays in arrears. A director who can show those reasons in the accounts is in a very different position from one whose company stopped paying dividends the month the application went in. Our guide to varying child maintenance covers the application process for every ground.

Can shares, savings or a director’s loan over £31,250 count?

They can. A separate ground applies where the paying parent has an interest in assets worth more than £31,250, and the list includes money on deposit, land and shares (reg. 69A). The ground excludes compensation for a personal injury and land that is the home of the parent or their child. It also excludes anything being used in the course of the parent’s trade or business. The same goes for an asset the CMS accepts could have been bought from income it has already counted.

The CMS turns a qualifying asset into weekly income. It applies the interest rate for judgment debts to the value and divides the result by 52 (reg. 69A(7)). That rate is 8% a year (Judgment Debts (Rate of Interest) Order 1993), so £100,000 adds about £154 a week to the director’s income.

Money a director has lent to their own company can count. In AE v SSWP and PE [2025] UKUT 49 (AAC), the Upper Tribunal treated a director’s loan of nearly £750,000 as a debt the father could call in, a “chose in action” under reg. 69A(2)(h), rather than as cash. A variation can rest on part of the loan where calling in only part would be reasonable. Liabilities linked to the asset must also be weighed when deciding whether the variation is just and equitable.

Shares in the director’s own trading company are less settled. The ground leaves out assets used in the parent’s trade or business, and in that 2025 case the First-tier Tribunal read the exclusion narrowly because a company is a separate legal person. The Upper Tribunal said it did not need to decide the point, so take advice before either side relies on it.

Child maintenance for company directors: which ground fits your case?

Three questions, one for each thing that decides the route. The answer shows which ground the CMS would look at and what it would need, then stops where a judgement about your own figures begins.

What evidence carries a variation for a director?

Documents carry it. A request has to name the ground it relies on (Child Support Act 1991, s.28A(4)), and the CMS decides it on what it can see. In most disputes about child maintenance for company directors, the useful material is either public or already held by HMRC.

• The company record. Companies House lets anyone see a company’s officers and its filed documents for free, which shows who runs it and what its accounts say.
• HMRC’s figures. Where the dispute is about child maintenance and dividends, the amount comes from HMRC’s records, not from the receiving parent’s estimate.
• The pattern over time. How salary and dividends moved before and after the separation is what turns “unreasonably reduced” from a suspicion into a case.
• The director’s own reasons. For the paying parent, the accounts, bank statements and forecasts that show why the company held money back.

When does a variation start to count?

In a dispute about child maintenance and dividends, timing matters as much as the paperwork. A variation asked for with the application can apply from the start of the calculation (reg. 13).

If the CMS has already set the figure, the first 30 days after its decision matter. A request made in that window can be dealt with as a revision (reg. 14). A revision reaches back to when the decision took effect (Child Support Act 1991, s.16(3)). After that, a variation usually takes effect from the date of the request (regs. 17(3) and 18(6)(a)). The CMS treats a request made by phone as made on the day you tell it, and a written one on the day it arrives (reg. 56).

If you are the director: what you can raise

Meeting a ground does not settle the matter. The CMS can only agree a variation that is just and equitable in all the circumstances. It must have regard in particular to the welfare of any child the decision is likely to affect (s.28F). That can include other children the director supports.

• Real business reasons. Retained profit with a documented purpose is the strongest answer to a diversion claim.
• Pension contributions. Where the CMS agrees a dividend variation, it deducts relievable pension contributions for the same tax year that it has not already counted (reg. 69(8) and (9)).
• Business assets. Assets being used in the parent’s own trade or business sit outside the £31,250 assets ground (reg. 69A(4)(b)). Whether that covers shares in a limited company is not settled. The 2025 Upper Tribunal decision treated a director’s loan as the director’s asset, not one the company was using.
• Debts behind the assets. Since the 2025 Upper Tribunal decision, liabilities linked to an asset must be weighed in the just and equitable test.
• A fall in income. If this year’s income is at least 25% below HMRC’s figure, the CMS can use current income instead (reg. 34(2)).

If you disagree with the decision, our guide to the child maintenance tribunal explains how to challenge it.

Child maintenance for company directors: frequently asked questions

General information about the law in England and Wales, not advice on your circumstances.