Maternity leave while self employed - how to manage

[screwedupp]

I’m freelance with a business set up as a limited company and am expecting my first child next year.

I’m aware that I’m entitled to £145 per week maternity allowance from the government for 39 weeks, which I thought would be really helpful.

However, on closer reading I’ve discovered that during the weeks that I’m claiming this allowance, I’ll only be allowed 10 KIT (keeping in touch) days - and if I exceed this I will have to cancel my allowance.

KIT rules state that any work done in one day counts towards one of the 10 days - so if you fit in half an hour’s work one day, that equals a full day’s work.

This has scuppered my plans somewhat as I was hoping to squeeze in seven or eight hours of work a week (spread over times when the baby is napping/DH can have him or her) while on maternity leave.

Finding out I’m only allowed 10 working days throughout the whole period will mean this won’t be possible.

In light of this, is it therefore best not to bother applying for the maternity allowance at all?

If any other self employed people have been in the same boat I would love to hear your thoughts.

@screwedupp

SMP is actually higher than MA, so you get 90% of salary for the first 6 weeks rather than £148. Definitely worth applying for and not using any KIT days in the first 6 weeks.

I personally would keep on top of emails while claiming SMP but not claim any pay from the company for these hours. You can then use the KIT days for when you need to do a bigger block of work.

My understanding is that pay for KIT days is negotiable. So even if you only work half a day you can pay yourself a full day, you will however loose a full day KIT allowance.

My employer also told me that once you go over your KIT days, if you work in a week SMP is only stopped for that week and will resume again the next week if you don't work. You might want to look into that a bit more though because I'm not convinced it works that way.

Out of interest what is your motivation to continue working. Is it cos you need the money? Or is it to keep the company ticking over without loosing clients?

If it's the latter and your happy to put the hours in and not claim pay for them I can't see HMRC being able to see what you're doing or interested in investigating you.

If you think you could get lots done and make more money without worrying about it then you should claim for the first 6 weeks (where the rate is higher) then just stop claiming as soon as you go over 10 days, and start paying yourself normal salary.

Definitely claim. Even if you work every single day you will still get two weeks worth which is better than none.

But realistically will you be working when your baby is less than a week old?

Also - how time sensitive is your work? Could you spend an hour writing emails on Monday but then not send them until Tuesday? (When you do another hour’s work and count it as a KIT day.)

Thank you @coffeeforone!

Yes, the main motivation to keep working is to ensure the company keeps ticking over in my absence. I'd also like to keep on top of emails, as I don't want 10,000 of them in my inbox when I do return to work!

I have a business partner who'll be able to pick up some of the slack, but if she was completely on her own for the entire time I'm on maternity leave then I think she would struggle with the workload.

If it's the latter and your happy to put the hours in and not claim pay for them I can't see HMRC being able to see what you're doing or interested in investigating you.

Could I work seven or eight hours a week (or more?) but not take any payment from the company and just live off the maternity leave payments in that case? Could I also take a bonus payment before I go on maternity leave to give me some extra funds through that period?

I'm so confused and can't find much clear advice online about this!

Also - how time sensitive is your work? Could you spend an hour writing emails on Monday but then not send them until Tuesday? (When you do another hour’s work and count it as a KIT day.)

I didn't think of that - yes, I could definitely do that!

Although if I was investigated and they saw that I sent out 200 long emails in the space of an hour, would they be able to claim that I must have written them previously and take action against me?

@screwedupp You could claim your business partner had written half of them ready for you to send. You're way overthinking this, though. I don't think HMRC will look this far into it.

@screwedupp
If there isn't a historic pattern of bonus payments that could look a bit iffy.

Definitely claim for it to start, you're unlikely to want to work for the first 6weeks and the 90% pay will cover you financially. Then once the pay drops to £148 you have your 10 KIT days.

If after the 6 weeks I still wanted to work, I personally would use the KIT days as 1 day a week for 10 weeks. Then after that those 16weeks I'd decide whether I want to return to work paid and loose the remaining SMP, or continue to claim SMP but not do any paid work.

Definitely claim for it to start, you're unlikely to want to work for the first 6weeks and the 90% pay will cover you financially. Then once the pay drops to £148 you have your 10 KIT days.

The £148 maybe in line 90% as it is a limited company. Assume the Op had just enough salary to trigger NI payments which is £166 a week or £719 a month. You don't pay NI on dividend payments.

Re the bonus, couldn't you just top up your SMO with an occupational maternity pay scheme? Write a policy for your business that states when on maternity leave you are entitled to full salary for the first six weeks for example (i e. SMP plus 10% so you are only paying the extra 10%). Might look less dodgy than a bonus payment? The potential downside would be that your policy would have to apply for everyone and if you have employees who you wouldn't want to have to pay the extras for, you'd lose money if they went on maternity.

Thanks @bluebury - that's super helpful.

I'd never have thought of that @TotHappy - thanks. The business will almost certainly always be just myself and my partner (we're a small operation and I can't see us ever making enough money to take on any staff!)

@Bellasblankexpression I can't even remember now annoyingly but I remember the rejection letter didn't arrive until a week or so after DS was born and by then I'd already accepted the other work (with the plan to call up and cancel the MA) so I was sort of glad when it was rejected as it saved me a job! Why would NI payments affect it out of interest?

Tbf my financial year before I applied was my most successful year financially (I just slipped in to the higher rate tax bracket by a couple of £k) so maybe that effected my allowance? I certainly earned a lot less during the first year of DS' life, but still more than if I'd claimed MA so I was happy with how it went.

Why would NI payments affect it out of interest?

I think if you're self-employed you can opt out of paying one class of NI, but it then means you're not entitled to MA/state pension - although I may be wrong on that!

@Teensruletheroost Would you begrudge a new mum her MA or SMP because she's working from say 7pm at night till 2am in the morning in between feeds, just to keep her business ticking over so she has a business to go back to once maternity leave is over? Would you class that as benefit fraud?

@userxx I suppose the counter-argument is that you're then earning money whilst also claiming MA (benefits). But I agree, in the real world it's not possible just to drop everything bar 10 KIT days when you run your own small business. It's very different to working in a company where others can cover for you!

@userxx

You seem to be targeting me. All I have said is what the rules are.

For others:
NI payments affect your eligibility for SMP or for MA. The rules are quite different for each but you have to have paid a certain amount of NI in order to be eligible.

www.gov.uk/maternity-allowance/eligibility
www.gov.uk/employers-maternity-pay-leave/eligibility-and-proof-of-pregnancy

The other big difference is that SMP is taxable income, MA is not taxable.

The email thing... As an example, if you're using a client such as outlook, you can go into offline mode, draft your emails and then go online on your kit day and send them all at once. Not very practical and shouldn't be necessary but it irks me that this is so inflexible that it's not to the advantage of working mums!

Not very practical and shouldn't be necessary but it irks me that this is so inflexible that it's not to the advantage of working mums!

That's the thing - it's just so silly! I wish they'd allow a bit more flexibility to make it possible to fit your work around the baby.

You can always claim then stop early. So if you decide to start doing work again after 6 weeks or whatever you can just ring and cancel the claim, but also gives you the flexibility to claim for longer if you need or want a longer period away from the business.

Why don't you just speak to a financial adviser?

@screwedupp are you the sole employee of your ltd company? If so you will have to apply for MA and not SMP, your accountant or payroll provider should be able to go through this with you but if you are the sole employee and there is noone who could 'take on your role' while you are 'off' then the company is unable to claim for SMP. You may be able to take a salary through the LTD co while off and ask your accountant/provider to call it 'Occupational Maternity Pay'

@QforCucumber no I'm not - I have a business partner and we're both directors of the ltd company. We don't have any employees.

Why don't you just speak to a financial adviser?

I could - but don't they cost a fortune?

@screwedupp Fab, though you are directors you are also still employees of the ltd co, as there is someone else who in theory pick up the workload then the company is entitled to claim SMP (make sure you are listed as eligible for small employers relief too, means the company get back 103% of the SMP payments) You could either still take your salary - of the difference between SMP and your salary as an occupational Mat pay for a set amount of time (as directors you can have an implied contract doesn't have to be written) Or you can just take the SMP only and stop your salary for the time you 'should' be off work, still drawing down dividends as these don't affect your SMP payments.

Don’t you have an accountant? You don’t seem very clued up about this to be doing everything yourself.

@NeedAnExpert I know - I thought it would be simple stuff but I had no idea about KIT days until I started reading up.

I think the other thing I need to work out is whether I'll be better off claiming the £140 per week SMP/MA over 39 weeks or actually just working part time.

@Teensruletheroost I'm not targeting you and I'm sorry if it comes across that way. My frustration is targeted at HMRC.