Maternity pay taxed...

[MsHedgehog]

So I just realised that statutory maternity pay is taxed...

I'm a higher rate tax payer, and I would be due to start maternity leave at the end of March. My work offers 6 months full pay, after which it's statutory for the remaining 3 months. I plan to take off 10 months as maternity leave, as DH and I want to do shared parental.

This means that for the entire financial year, I will be getting a full salary for 8 months of the year (first 6 months as maternity, followed by the last two months when I go back). I think that means I would use up my tax free allowance over those 8 months.

Does that mean I'll be paying 40% on statutory maternity pay, plus NI for the three months I receive statutory? Essentially, it would mean I would be getting circa £80 a week?

Sorry, I only just realised it's taxed when I was trying to figure out how much I should be saving now to tide me over, hence my panic!

20% won't it? unless over £50k earned in first 6 months

It won't work out quite like that, because your tax allowance is spread over the year, too. But your total pay for the year will be taxed as normal.

Mat pay goes through payroll, just like salary. So your tax free allowance will be spread out over the year as normal (so in April you'll have 1/12 assigned, in May you'll have 2/12ths minus anything you used in April, and so on.

Assuming you're on a cumulative tax code, this will actually be an advantage to you and you'll end up get tax back while on SMP only - this is because the staggered tax code assumes you'll earn at roughly the same level throughout the year. So when Jan/ Feb/ March 2022 comes around, the calculations that were correct for month 1 (because you only had 1/12 allowance available) suddenly aren't correct because you've not used your full tax free allocation for those months.