Maternity Allowance when Self Employed

[LittleSugaPlum]

Im self employed and have just filled in a claim for maternity allowance. However my income will not drop whilst im not working as DH will be keeping my business afloat whilst im on maternity leave.

Am i still able to claim maternity allowance even though my income will not decreased ?

As far as I understand, as long as you are genuinely not doing any work beyond Keeping In Touch days, if required (and I would imagine in your case, they might make more effort to audit), then you qualify; in the same way as if you had employees and took ML.

If you continue to pay yourself as normal throughout maternity leave it may be difficult to convince HMRC that you are not working. Fine for your DH to work in the business, and for the business's income not to drop, but I'd be cautious about paying yourself at the same rate.

flowery thats what i thought, im worried that if i claim this maternity allowance then when i submit my books to Inland revenue next year, they will say i ve falsly claimed and make me pay it back?

But just because money is coming into the business doesn't mean you are working in it. Are you going to employ your DP to cover you?

No im not going to employ him. I will still get a wage transferred into my bank every month

HMRC go by the amount of profit that the business makes and you will also have to declare your maternity allowance on your tax return form.

You can keep drawing out of your business as long as the money is there, which doesnt affect your MA. If your husband chooses to work for free, I dont see its a problem, as you will not be working yourself which is the main point at stake here.

"I will still get a wage transferred into my bank every month"

I wouldn't do that personally. You can be paid for up to 10 KIT days as you know, but if you are being paid the exact same salary throughout, you may find it difficult to convince HMRC that you've only worked 10 days and just given yourself a big bump in your daily rate for the duration of your mat leave.

I'm the first to say I'm no tax expert at all, but for the sake of making it appear genuine, I would probably either pay myself a reduced amount to actually reflect the 10 days, or would pay the money to your DH instead. You can always pay the remainder to yourself later on when you're back from mat leave but if things get looked at and you've paid yourself normal salary throughout, that may raise eyebrows.

DH is already self employed as he runs his own business, so me putting money in his account and declaring it will make his business have to go VAT registered as it will be 9 months he ll be declaring my money for, so his business will earn too much.

Sounds complicated i know, i think i ll ring Jobcentre in the morning and see if they can help

But it wouldn't be his business earning the money, it would be him personally.

Why not just pay yourself the appropriate amount less while on mat leave, then increase your salary by enough to make up the difference when you go back to work? That way you haven't got to employ DH, and you'd still receive the same overall, but it wouldn't potentially look a bit questionable to the taxman.

Perhaps I'm being over cautious, and yes the main point is that you don't physically work more than 10 days, but if you get the same salary every month as normal, as a taxman I'd probably want to dig a bit deeper to find out what the deal was.

How much less do i pay myself?

Depends how many days you normally work to earn the salary you normally pay yourself. You're allowed to work 10 days during your mat leave, so I'd probably pay yourself roughly the amount that is commensurate with that based on how much you work normally.

ah! well it wouldnt be worth me claiming MA, i would be alot worse off.

Why not ring the helpline and ask? They're really helpful and friendly.

Do i ring the job centre?

Are you a director of your own limited company or are you a sole trader?

im a sole trader

There should be a number on the DirectGov website, but I think yes, it is just the JobCentre. I found them v friendly and helpful too - it seemed that the process is based on trust and they try to help you get the most you can, which was a pleasant surprise.

In that case you won't be entitled to maternity pay but instead a maternity allowance for up to 39 weeks. Contact HMRC to ensure you meet the criteria.

Helps if I read your initial post properly - you should be fine to get your allowance as long as you filed in the form correctly!

and it wont matter that im still getting a wage?

You don't get a "wage" though remember, as you're a sole trader you take drawings. The profit of the trading entity will still be taxable in the same way, I.e. through your self assessment.

Double check with HMRC to settle your mind, after all my tax exams were a while ago!

thanks empire, i will ring them tomorrow

If you've still got the guide to filling in the form then the number should be on there??

Whoah, there's a lot of people guessing on this thread, some of whom should know better (that's intended as a gentle rebuke - you know who you are ).

You said right up front that you are self employed. The term 'wage' is therefore totally meaningless for you, the money you take out of the buisness is rightly called 'drawings'.

Maternity allowance is paid while you are on Maternity Leave i.e. not working. If your business can sustain itself without you working in it (e.g. by your husband acting as an unpaid employee, which is itself perfectly legal as long as he is not claiming Job Seekers Allowance or other benefit on the basis of not working), then you can continue to earn income while you are not working, just the same as you continue to earn income from savings, investments, shares etc.

YOU DO NOT PUT MATERNITY ALLOWANCE ON YOUR TAX RETURN

So take whatever drawings you like while you are on MA. Make sure that you don't do any work during your maternity leave, and that there is plenty of evidence (emails etc.) that your DH has been doing it all in case DWP (not HMRC, they are not concerned with MA) investigate.

You could try ringing a Jobcentre Plus, but they are notoriously bad at understanding the rules for self employed people claiming MA.

Talking to an accountant might be a good idea, it may well be that either or both of your business would be more tax efficient if they were run as limited companies.

whoops! apologies, I did a quick google and was misinformed about putting it on the tax return... It doesnt go onto tax credit forms either....

but my other comments are correct, you can draw what you like from the business as long as the money is there and if your husband works for free, that is fine