Maternity pay confusion

[amiold]

I am totally lost with my maternity pay. Hoping someone intelligent can help.

I started maternity 21st October and I get 18 weeks full and then smp.

Last month I thought I'd have had a full wage but turns out that we get paid middle of month to month end (this was clear on my pay slip so I didn't contact them - was just an incorrect assumption I'd made). So last month I was £400 less than I thought.

This month I thought it would be statutory minus 40% tax. I was expecting £400 - 500 (based on 4 week month). I've been paid maternity based on a 5 week month so that's put the figure up. But... I've received £1500. It appears to be related to my tax as In the deductions section it has "-723".
So it appears I've not been taxed on 5 weeks maternity and also have some sort of rebate... is that because it's year end and my payments were based over 12 months predicting the full amount ?

Also, come the new financial year will I be taxed at 20% or 40% on my smp? Because I think as I'm going to be off until September I may not earn over the threshold for 40% tax. Or will they tax me at 40% and recalculate when I'm back?

Same happened to me I got a tax rebate when going on maternity leave as paid too much tax. Mine was different though as I got rebates for about 6 months of around 150 each month but it will be because you are at the end of the financial year that you got a big lump.
you won’t pay any tax on your SMP and then when you go back to work you may not get taxed for a couple of months depending on when you return. I returned in September but didn’t pay tax til December .

And do you pay at the higher rate?
Surely I'll pay some tax on my smp until I return in September? Or will they even it out when I go back?
Honestly I'm trying to budget and just can't seem to fathom it x

What's your tax code? If it has an X at the end I believe they adjust tax based on pay each month to make sure you don't overpay. I had some small rebates towards the end of my mat leave too.

1257L

Seems to have always been this?

Yep. I don’t think you will I didn’t . I was confused when I went back and didn’t get taxed but it was checked and it was correct as I took the extra 3 months that you get paid nothing for so June up til august I had barely received anything as SMP is dreadful.

@Mumoftwo2022 I think I'll only have one month of unpaid. But if they don't tax me plus my kit days I may be able to wangle another month. It's so confusing, I wish they set out what you'd get each month.
I think I'll defo pay tax as soon as I'm back as it looks like my company average payments out 🤔

@amiold 1257L meant your tax free allowance for the year is £12,570 or £1,047.50 per month. As your monthly maternity pay is less than £1,047.50 per month you won’t pay tax on this.

and excess of the £1,047.50 allowance that you don’t use in each month will carry over to the next month (within the same tax year) which is why you also may not pay tax for a couple of months once you return to work as you may still have some allowance carried over from previous months to use

I questioned it to HR as I was confused and they said it isn’t down to them it’s HMRC. I kept the money back that I should have been taxed just incase it was a mistake but I’ve worked it out and does seem correct for the amount I have early in this financial year and how much tax I have now paid.

@Capybara95 do you think I'll pay tax on my smp or not?

I see how I wouldn't pay when I return. I'd have to work that out. I reckon I'll earn circa £35/40 in the months sept 24 - march 25 so should only pay 20% on my earnings?

@Mumoftwo2022 this is another worry. I don't want a big bill!!

Payroll software generally allocates 1/12th of the personal allowance for every month you work (as long as you have a cumulative tax code, which you do at the moment with the 1257L code). That way, if you work for a full 12 months on your normal salary, your tax gets spread out throughout the year. However, this means that can end up with tax repayments if your income drops like this part way through a tax year.

At the start of the new tax year, you’ll accrue £1,047.50 tax free every month. If you go back in September you’ll be able to earn 5x £1,047.50 minus any SMP you’ve been paid since April, before paying tax (assuming your tax code doesn’t change).

NI is worked out each month rather than over the whole year so you’ll start paying that again straight away.

Have you looked at maternity money web page it works it all out for you.

You pay tax on what you earn that month regardless of it being maternity pay or regular pay, so if it's under the 40% you won't pay 40%

What do you mean you get paid mid- month to month end and what day do you get paid.

@jellycat thanks. Think this is the same that @Capybara95 explained. I still think I'll pay tax in September as I won't have accrued enough to cover a month. I could be wrong but suppose I will see 😊 all complicated stuff to me, glad you all know how it works.

I get paid 15th but it covers the period up until the last day of the month.

Sorry it looks like the maternity money website not longer exists!

Yes it's this.

All year your tax code has assumed you will earn the same each month. Now you're earning less than the tax free amount each month so there's no tax to pay and essentially you have overpaid in previous months (because your tax free allowance was "wrongly" allocated to this period you don't need it).

Another way to look is that each month they look at your YTD position. Your last pay check would have been Feb? In which case they will tax your YTD pay and deduct 11/12 of your personal allowance and tax the rest. Tax year runs to 5 April which is realistically March payroll for most people). This year should be done and dusted and should be correct as at March payroll.

When you go back it will be a new tax year and you will be taxed accordingly, you won't be paying more tax than you would have done because you still earned less for some months.

I found SMP completely unpredictable unfortunately, but always ended up with more each month than I expected for various reasons!

What week are you in now?

19 I think

@TheOneWithUnagi thank you.

Do you think I'll pay tax on my amp with it being the new tax year or not until I return in sept? Obviously I'll only be earning either 736 or 920 depending on whether or not it's a 4 or 5 week pay month

if you are only on smp come April.pay you won't pay any tax as will be below 1/12th of your personal allowance.

@GeorgiePorge fab thanks. And what about kit days? Will I just pay tax on what I earn over the £1047/£12570 allowance?

You won't be deducted from you pay during the Smp period as you average monthly wages will be lower than personal allowance.

Kit days are added to you SMP and total is your monthly pay and taxed accordingly.

It depends when you go back and how much you earn April to April as tax is calculated annually.

If you total earnings over the year April-April are £12571-50570 you willl pay 20% on this then £50571-125140 is 40%

But you might get stung with repayment when you go back so save a bit.

I think this is correct but not 100%

@thedendrochronologist repayment for what though?

I'll earn in the first bracket. I think with the pay rise I'm getting in April, had I have earned fully I'll be looking at around 60k per annum but because I'm only getting smp April to sept this should put me into the 12750-50571 bracket.

@amiold...depends is the short answer...basically any unspent personal allowance from each month effectively rolls forward...so in May the calculation is looking at earnings to date against 2/12th of your personal allowance. providing you don't earn over 100k or additional taxable benefits you shouldn't be in a position where you owe tax beyond what they adjust in your monthly pay. thesalarycalculator.co.uk is really helpful for working out tax and net pay...if you can work out what you will earn for the year (Inc smp and kit days) then you will know what your annual tax bill is and their shouldn't be too many surprises.

@GeorgiePorge will have a look tomorrow. Thank you 😊

It's all been covered but I agree you won't.
As for KIT days if you earn £736 one month you are going to have about £300 left of your personal allowance which will roll into the next month (and keep rolling forward along with anything else unused until you start earning over again)

I don't think you are going to have a horrible surprise when you go back to work either, not sure when that will be but you are going to have any accumulated personal allowance you haven't used YTD and then each month is going to be taxed correctly going forward.
Remember the last 3 months of maternity leave are nil pay if you're planning on taking these.