How do you calculate income tax over mat leave?

[cloudyskye]

We are TTC. If I take a year of mat leave I will get 26 weeks full pay, 13 weeks SMP and 13 weeks unpaid.

How does income tax work here? When my pay drops to SMP, will I get some tax refunded from what I’ve paid through PAYE? If I put the full amount I’ll receive in the year into a PAYE calculator like the MSE one, will that actually tell me what I’ll end up with for the year?

I’m so confused about how to work it out. I tried to find a maternity pay calculator but couldn’t find one that let me put in the different amounts.

I earn more than DH, and I really need to know how much I would lose. Thanks for any advice!

You can reclaim any overpayment at the end of the financial year.

The overall tax you pay will depend when in the tax year you go on maternity leave. Do you do self assessment?

OK but is there any way to a calculate it so I can budget? I’ve added up my potential earnings for the whole year and put that into a PAYE calculator - is what comes out accurate?

Hi, you will get taxed on whatever you receive via salary and/or maternity pay for the period from 6th April through to 5th April. The final tax rates will be based on your total income in that year.

How that pans out for you really depends on your current salary and when your maternity starts.

High level example, you go on maternity at start of tax year. For the first 6 months of full pay you will be taxed as though you will receive this amount for the whole year. When you come to the next 6 months at reduced pay, you may gradually get a refund. But again, this depends on your current salary. (Basic rate or higher rate.)

To turn this in its head, say your last 3 months of unpaid maternity was in April to June, being the first 3 months in the tax year. When you return to work in July, your tax would probably be minimal in July, before coming back to a more settled position.

If you provide your annual salary and a potential start date for maternity, I could clarify a bit more.

Oh thank you, I hadn’t even considered the impact of when the tax year is.

My full salary is £52,317, £5k of which is non-pensionable (I’m a civil servant).

We are TTC now so in an ideal world I’m hoping to have a baby in Dec, Jan or Feb but obviously it might take longer.

Hi, so to keep it simple, I am going to assume a taxable salary of £50k, with maternity to start on 1st Jan 2024.

For the tax year ending 05/04/24, as you continue to receive full maternity pay in Jan to March, you will pay the full tax on that and not recover it in the future.

For the tax year ending 05/04/25, you will continue to pay full tax on your full maternity pay for April to June.

For July to September, you will continue to receive SMP and this is included in your taxable income for the year to date, but it is lower than your person allowance for that month. So the year to date tax calculation gives you back some of the tax you paid in the first quarter.

Same again for October to December, but you have no income. You should still get monthly tax refunds.

Assuming you then return full time in Jan 25, the rest of the year is taxed like the first quarter.

As an FYI, this income tax is calculated on a cumulative basis, however National Insurance is calculated on the actual value paid in a month.

Pic to follow might be a little bit blurry. This shows the net pay calculation for the period from April 24.

Pic now attached, showing net pay in each month.

This is so kind and helpful of you, thank you so much.

@WeeFinbar I would absolutely love if you could help me with my situation too, my HR team at work have been awful at explaining and we are really struggling to work out what we will have coming in (baby is 6 weeks old)