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.

I would speak to an accountant to be sure, but the advice I was given by my accountant when on maternity leave as Director of a Ltd company (claiming MA as I the company did not exist early enough for me to get SMP) is that I could continue to claim my Director's salary from the company while on mat leave, although I did not work (for clients) apart from the 10 KIT days before I surrendered the MA.
However, I was not billing clients during this time, so you would need sufficient cash in the company to continue paying the salary (I imagine?).

No worries userxx

OP - you really should get an accountant not only to deal with this but to sort out your statutory accounts and corporation tax. These things may look simple but it's all the rules you don't know about that can cause the issues or potentially save you money. I am a strong believer that we are all experts in our own area and I'll earn money doing what I am good at and pay people money to do what they are good at.

Thanks @TeaandHobnobs - that's really helpful. I should have sufficient cash in the company as the other director will still be working (and billing clients for it).

@MrBobLobLaw as I understand it you have to be able to show you’ve made enough NI contributions over a certain period prior to claiming maternity, although I’ve just reread and they give you the chance to pay it in order to claim maternity, if you haven’t.
I think I’ve got that right!

My acct costs about £1200 a year but saved is at least £5k.

Bellasblankexpression
Unfortunately you have it wrong. You can’t retrospectively pay class 1 contributions in order to claim SMP. I linked above to the eligibility criteria.

You see OP this is why you actually need an accountant as needanexpert suggested. Anyone could tell you anything here and you have no clue which of us are qualified to advise you or not.

Oh, my mistake @teensruletheroost. My accountant did advise me of this, which is where I got the information from, but I'm a sole trader, so perhaps that's where the difference lies? Happy to be corrected though.

The attached is what I was referring to, so it's Class 2 instead of Class 1, and I was responding to another poster rather than the OP, so sorry if I caused any confusion.

Bellasblankexpression - yes it is different for self-employed people. The OP is employed (albeit through her own limited company) so different rules apply to her.

I claimed SMP and wasn't paid a penny until 13 months after I had DS, so please bear in mind when you're claiming that the money may not come to you immediately. I also worked, but very little and mostly towards the end of the period, so it worked out ok. I didn't invoice for occasional email responses and two evening functions, I just didn't count them as work; swings and roundabouts their later invoices have a less generous interpretation of billable time. I also used some substitutes for a bit of the work, that doesn't count towards the days and then I made profit on their work. (Time chatting them through everything 9 times on the phone while juggling a baby on the boob isn't "real" working time.) Can your DH do some business maintenance for you in the evenings when he's back from his other job, so you don't have to?

I think there should be a different set of criteria than 10 KIT days. Max hours per week would be easier. Max income would be fairer of course but it can be rigged, doesn't work when you have employees etc. Or just agree one lower payment for everyone self-employed to support reduced hours rather than this daft system for an amount that won't pay all the bills anyway.

I meant to say, my company paid me, but my company wasn't repaid for 13 months. Luckily I had business savings to fund it.

MRex that's down to your accountant, they can claim for an advance payment of the SMP from HMRC (they don't tend to make that widely known though!) I've literally just completed the form for a client of ours as they can't afford the payments up front.

I'm going on mat leave soon as the sole director and employee of a limited company. My accountant advised (and hmrc and DWP confirmed) I needed to be going down the SMP route. I've applied for the money in advance (with my accountants help) and received it within a couple of weeks so it's sat there waiting for me when I go on mat leave. HMRC were really helpful as was DWP (in advising I shouldn't be claiming MA), so maybe call one of them for clarification on which you should be applying for.

I realise none of this answers the KiT question though! I've been debating similar and not really found a solution.

@QforCucumber - not quite, the old accountant didn't claim from the first month and even though I switched due to that and other incompetencies, it meant the new accountant wasn't allowed to put in the claim until the end of the period or I'd have missed the first few months. So, they claimed at the end and then HMRC took 5.5 months to pay. I wouldn't like someone to try to rely on the money being paid immediately.

What's even more irritating is that if you are employed, there is no limit to the number of days you can work for another employer while on maternity leave without it affecting your SMP!
So employed women get all the advantages of being employed AND are allowed to do as much extra freelance work as they like while claiming SMP, but if you are solely self employed and rely on being able to work for your income, you aren't allowed to do more than 10 days without losing your MA.

However, it does look as though you can claim up to 20 'SPLIT' days if you take shared parental leave, so I'm not sure if there's a way to make that work for you?

Just to add something OP, you might as well claim because even if you only use 5 months of it before the 10 KIT days are up, you at least get 5 months of the payment.

What's even more irritating is that if you are employed, there is no limit to the number of days you can work for another employer while on maternity leave without it affecting your SMP!

I didn’t know that - it seems so unjust! Why do self-employed mothers get such a raw deal?

I meant to say, my company paid me, but my company wasn't repaid for 13 months.

How frustrating! Is that the norm I wonder?

At what point would you suggest applying for my SMP?

It’s not a case of when do you suggest applying for my SMP, it’s a case of the employer (ie the company) getting the correct paperwork from you, calculating it properly and putting it through payroll and reporting to HMRC with the normal payroll reporting. The company then pays you. The company can apply to HMRC for advance funding but that is between the company and HMRC.

The waiting for 13 months is very unusual and because someone has cocked up and not applied for it in advance. When you apply for funding from HMRC it is usually paid within a couple of weeks.

You really should get an accountant to sort this out. No offence but you clearly don’t know what you’re doing sufficiently to make sure you comply properly.

I'm not sure if this has already been suggested, but could you create a policy whereby it states you are entitled to SMP plus x amount of money for maternity pay? Either equal this to the value of a KIT day a week or whatever your company can afford.

My policy at work is SMP plus 50% of my salary, so I'm still paid some extra.

Then surely you could work on a voluntary basis, i.e. not working for payment.

As an employee I am expected to forward my emails on during mat leave even if I don’t work them. It doesn’t count as kit leave

@Teensruletheroost - it's actually a little more complicated than that. Monthly advance payment comes from reducing other payments, so if you only have one salary in the business it might be that there isn't enough tax due to deduct a full SMP payment if the accountant doesn't start way back months earlier in maternity. Full advance payments are if the company can't afford to pay the SMP, it's intended for companies on very low income and if that's clearly not true due to funds in the business then that's a problem. It's great that you think it's unusual to get a late payment even when it's all filed with HMRC, but I'm certainly not the only case.

@screwedupp - you need to ask your accountant because some of it will depend on how you're paying other taxes (particularly as you have a partner on presumably full wage and therefore taxes that can be offset). You can start maternity leave towards the end of your pregnancy when you're stopping work.

Actually @MRex, it is not about whether there is money in the company or not. It is purely about whether there are sufficient NIC/PAYE payments due to HMRC on a monthly/quarterly basis to be able to deduct the SMP from. This is exceedingly unlikely in a two director company unless someone has really badly set up.

The timing issue depends on how it is claimed back. If it is claimed back as advance funding of SMP then the payments are usually made within a couple of weeks.

The issue is when it is not claimed back via advance funding but just ends up as a credit on the account at the end of the payroll year. When that is the case you have to apply for the refund a totally different way which I agree does take months. This should not be the case in anyone who knows how to do it properly and is on the ball.

If there is cash in the business then surely the company should perhaps pay for an accountant rather than try and seek free advice from randomers on the internet.

Ok fair enough. Anyway, I agree - get an accountant. If your accountant is crap then get a different one who does understand how it works.