CSA Self Employed
Being self employed doesn’t mean that non resident parents can avoid paying the CSA, but many NRPs do see self employment as a way of escaping the Child Support Agency.
Because the CSA tends to use the DEO (deduction from earnings order) as its favoured method of collecting payments, many people choose to quit their jobs as a way of escaping it. The CSA prefers to use the DEO because it is quick and easy, and it means they do not have to converse with the non resident parent or come to any agreement about how and when payment will be collected. The CSA will issue your employer with a DEO, and your employer has to comply with it or they will be threatened with the bailiffs. Few employers will challenge this.
As a result, and because a DEO can be for as much as 40% of your wage, many people choose to quit their jobs and either become unemployed, or go self employed. The CSA does not like to chase after non resident parents who are self employed because it is more hassle, requires more legwork, and through creative accounting the self employed are able to disguise earnings, thus reducing the amount they owe to the CSA for the maintenance of their children.
The CSA will use the most recent tax return of the self employed person to work out how much money they earn, and how much money they need to pay. Because a non resident parent has to pay 15% of their earnings, after tax, for one child, it is in the NRP’s interest to declare as little as possible in their tax return. This way they pay less tax, and less child support.
Becoming self employed is very easy, and it can even be done while keeping your current job if your employer will allow it. Some non resident parents choose (with their employer’s permission) to become ‘contracted’, which means they are not salaried, they do not have any of the perks or security of a full time employee, and they pay their own tax.
There are many tales on our website from non resident parents who have gone down the self employment route for one reason or another, and you can read their advice on how they have managed it, and what the outcome was, right here.