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New rules will mean that smaller changes in a parent's earnings could affect how much they pay

Thousands of separated parents could see the amount they pay or receive in child maintenance change more often.

New rules will mean smaller changes in income could affect payments much sooner.

The Department for Work and Pensions (DWP) has confirmed plans to change how the Child Maintenance Service (CMS) works out how much a paying parent owes.

Under the reforms, the income change needed to trigger a new calculation will fall from 25 per cent to 15 per cent.

This means parents will no longer have to see their earnings rise or fall by at least a quarter before their payments can be adjusted between annual reviews.

The Government also plans to include other sources of income, such as dividends, investments and rental income, in the standard calculation.

Currently, child maintenance payments are generally calculated using a parent's gross annual income provided by HMRC, usually based on information from the latest available tax year.

Each case is automatically reviewed once a year to make sure the amount being paid remains appropriate.

Payments can also be reassessed between these reviews if the paying parent's income changes significantly. At the moment, however, their income normally needs to rise or fall by at least 25 per cent before the CMS will change the calculation.

Lowering this threshold to 15 per cent means smaller pay rises or falls could result in maintenance payments being adjusted sooner.

The change is intended to make payments more closely reflect what a parent is actually earning, whether their income has increased or decreased.

The way other sources of income are treated is also set to change. Taxable income from investments, dividends and rental properties recorded by HMRC will be included as part of the standard CMS calculation.

At present, this income is generally considered through a separate "variation" process, where a parent has to ask the CMS to take additional financial circumstances into account.

Bringing this income into the normal calculation should mean it is considered automatically rather than relying on a parent to make a separate request.

The DWP said: "The Government also intends to include unearned income within the standard calculation, helping to ensure liabilities more accurately reflect a parent's financial circumstances and that more money reaches children."

By folding these income streams into the routine calculation, the reforms aim to remove the need for parents to navigate that additional step.

The amount a parent pays through the CMS depends on several factors, including gross weekly income, the number of children involved and whether the paying parent supports other children. Overnight stays with the paying parent can also reduce the amount owed.

Parents earning below £7 a week pay nothing, while a flat rate of £7 applies in certain cases, including for some benefit recipients.

The standard CMS formula covers gross weekly earnings up to £3,000, beyond which the receiving parent may apply to the courts for a top-up.

These new rules will not take effect immediately. Secondary legislation must be laid before Parliament and approved before the changes can be implemented.

The Government has said further details on timing and legislation will be set out in due course.