Pregnant and working for DPs limited company

[hedgehoghouse]

Hi I work for my partners company. It's a limited company, but only myself and DP. I am a director of his company, but not a shareholder. DP is the only other director and he is the only shareholder. DP does the manual work and I do some admin for the company, invoicing, expenses m, receipts etc. He pays me just under the tax threshold, so around £700 a month. He pays himself the same, but also takes dividends. I do not get these. The company doesn't bring in much money. It is our only income.

I am due to have a baby later this year, so I was wondering what happens with maternity pay? We do have an accountant, but will be charged £££ for any advice, so I'd rather have an idea of how it works.

Can I claim maternity allowance or does it have to be SMP? I didn't get SMP in my previous pregnancy when working else were, as I was on a fixed contract and already pregnant when I started the contract. I got MA.

Anyway. My main question is are we better off not to take anything and just carry on paying me as normal? Because my partner will have to pay more tax if he pays himself more? My partner of course won't need me to work straight after giving birth, he could do it himself when needed, my work just eases his load.

And just to clarify no we are not married if that makes any difference ?!

You will need to check the eligibility criteria for maternity allowance but resigning your employment will make you ineligible for SMP and I think you would then be eligible for MA.

On your main question, it would be better to carry on as normal rather than pay SMP. If you are not getting any money off the government, it is tax efficient to utilise your entire personal allowance.

It could be challenged if you are not actually doing any work in return for the pay so I would put something in writing beforehand to agree that it is contractual maternity pay.

If you are eligible for MA, then you are getting free money off the government of £5,580 so that changes the calculation a bit. Your partner will be taxed on the £12,500, he would have given to you but that should be less.

An aggressive strategy would be resign from your job. Take the full 39 weeks MA, then depending on how the tax year falls, rejoin on a higher salary and use up the remainder of your PA in that tax year.

So you're unmarried, pregnant and your partners company is your sole source of income, for which he pays you the bare minimum and takes the dividends for himself ?

You're INSANELY vulnerable. If the relationship ended tomorrow you'd have zero protection. Never mind mat Allowance- focus on getting an independent source of income!

Jesus wept.

@Winebottle I wonder if I can resign from my general work and still remain a director ? Or I have to change that bit too. I will have to have a google and a think.

Thank you for the input.

I agree with Quick question to be honest! It probably would be worth checking with the accountant in honesty to ensure everything is done correctly and you get what you are entitled to; and that your other half pays you what you are legally eligible for.

You can stay a director but you wouldn’t want to. Being a statutory director comes with a load of legal responsibilities and duties that far outweigh any rights.

On the maternity leave side, assuming you meet the general conditions re working time and pay I don’t see why you wouldn’t want to claim SMP since this is repaid by the government to the business. You could do an agreement with the business for an “enhanced” maternity package that continues to pay you £700 a month for the first X months even though you’re on maternity leave. Then the government pays you SMP (though the cash is coming from the business in the first instance) and the business tops you up to your normal wage. Seems a lot more sensible than resigning.

However, when you’re ready to go back to work please get a job where you’re not paid a pittance by a ‘partner’ from a business that you have no financial interest in.

I think honestly you need to give him a choice - if he wants you to continue helping him grow his business then he transfers half the shares to you and gives you rights to 50% of the dividends - you then have a financial interest in the company doing well because you own half of it. Being a director sounds like it should give you some power but it really doesn’t in situations like this.

It's not a pittance, I do small amount of work with total flexibility, around caring for our child. This also means my partner has more time, when at home because he's not doing things like invoicing after a long day out. I get paid for my work so it reduces his tax liability and makes us better off.

I will speak to our accountant about SMP thanks.

But do you not see that he gets all the benefit (help with his company and free childcare, lower tax liability) whereas you get all the risk? If anything were to go wrong with the relationship you wouldn’t have a leg to stand on.

If you had a share of the business you’d be slightly protected, what do you think his reaction would be if you asked for it?

I’m sorry if I sounded rude by calling your income a “pittance”, I can see that’s how it came across I meant more in terms of how it compares to your financial risk.

@hedgehoghouse pls listen. Relationships change after birth. Sometimes they break down. About 40 percent of the time in fact. If that happens you have no income, no right to his assets and crucially as he's self employed paying himself the minimum he'll have little to no child support liability.

I'm sure he's wonderful and kind and you love him. But why on Earth allow this level of risk in your life? No one ever expects it to happen to them.

@Fortheloveofscience it makes it more complicated me having a share of the company, when we are not married. It would actually cost us slightly more, so we didn't do this. It has been discussed with the accountant, not at my suggestion, my DP had no issue with it. I see everything.

@QuickQuestion2019 we already have a child together, so I am not worried about our relationship after birth. Whilst I appreciate your concern, I'm not naive. I am completely happy with my circumstances and I do not wish to get married or work elsewhere at the moment. I

Relationships can change at any point, including after the birth of a second child.

For me, just before my second child was born, my DH died. Thankfully I had my own income. I imagine if anything happened to your partner the business would fold?

You have a duty to protect your children by protecting your earning power. Circumstances, whether through a break-up, injury or worse can change in a heartbeat.

He holds the power OP.

You can choose to consider me a rude stranger on the internet but I'm 100 percent correct.

I wish you the very best and hope your DP continues to be decent.

If the OH died and there was no one to run the business, then there'd be no income so neither wages nor dividends etc., so doesn't matter if the OP was a shareholder does it?

For protection, the OP needs their OH to have life insurance and permanent health insurance policies to cover for when he can't work.

well that depends if she could employ someone to do most of what he does really.

But yes you are vulnerable - I do similar but get paid more and have shares for 49.9%. I actually consider myself vulnerable at the moment and we are working towards me having more consultancy input (I have the skill base and qualifications) but for whatever reasons previously haven't done this directly with clients

You should be taking dividends to be more tax efficient, on top of any other benefits. I'd get a new accountant.

I'm an accountant

As long as you meet the criteria, you should claim SMP

I have no idea why it would cost more for you to have shares - it should save you money

Personally, look for a new accountant who charges flat fees and answers your questions without charging a lot of extra £'s