Maternity Pay and Allowance for Business Owners

by Ingrid Niang

fr accountants

Sole trader or director of your own limited company? Pregnant or planning to start a family? Confused about Maternity Pay & Allowance?

There are 2 distinct benefits you could be entitled to claim depending on your business structure and level of earnings: Statutory Maternity Pay or Maternity Allowance.

Sole trader

If you are self-employed, you are not entitled to Statutory Maternity Pay (SMP) but you may be entitled to Maternity Allowance (MA).

Maternity Allowance is a benefit paid weekly by Jobcentre Plus. MA can be paid for up to 39 weeks and no income tax or NI contributions are payable on Maternity Allowance.

The standard rate of MA is currently £124.88 a week.

If you are self-employed and do not have a small earnings exception certificate, for any week covered by a Class 2 NI contribution you will be treated as having enough earnings to result in the standard rate of MA, payable at the end of the week covered by a Class 2 NI contribution.

If you are self-employed and hold a small earnings exception certificate, you will be treated as having earnings equal to £30 at the end of any week covered by your certificate, and receive a weekly rate of MA of £27.00 (90% of £30).

Director of your own limited company

To qualify for Statutory Maternity Pay, you must satisfy the continuous employment rule (continuous employment for at least 26 weeks into the qualifying week (which is the 15th week before the week in which the baby is due) and the earnings rule.

Earnings rule: your average gross weekly earnings must be at least equal to the lower earnings limit for National Insurance (NI) purposes:  £97 a week for tax year 2010/11, £102 a week for tax year 2011/12.

The amount you get depends on your earnings. The first 6 weeks of SMP are earnings related and you will get a weekly rate equal to 90 per cent of your average weekly earnings. The remaining 33 weeks are paid at the weekly standard rate SMP of £124.88 or the earnings related rate if this is less than standard rate SMP.

SMP is paid by the limited company and reclaimed from HMRC.

If you do not qualify for SMP, you may be entitled to MA.

Ingrid Niang is a qualified accountant with 11 years experience, of which 9 in the corporate world. She set up FRAccountants in 2009 after her third child was born as she was looking for a more flexible way of working, which would enable her to spend more time with my young children whilst developing a rewarding career. You can contact Ingrid at [email protected]

4 thoughts on “Maternity Pay and Allowance for Business Owners

  1. Wendy Ager

    Thanks, this will be helpful to many I know! I have tried to explain this myself but this makes it so much easier – can just direct them to this post now.

    Thanks Ingrid!

    Wendy Ager

    Reply
  2. Frances Weir

    One other important thing to note is that you must actually cancel a small earnings exemption certificate in order to extinguish it. If you just start paying class 2 contributions as well, the exemption certificate will override this in terms of maternity benefits, and you will only ever get the lower (£27 a week) rate of maternity allowance.

    Frances

    Reply
  3. Buttercup Bus VW Campers

    I cancelled my exemption certificate and volunteered to pay NI but have not had any letter confirming this in the post. Think that I had better give them a call! My application is tricky as I run a Ltd company, have a Sole Trader business and worked for a company 3 days a week until May this year. That form for maternity pay is bound to be a headache! :-)

    Reply
  4. Patricia Bittner

    Wow this is the first time to read this blog.. This totally awesome topic.. All of those words are very mind focusing it may help other people that are lost in motivation.. It is like I am watching a inspirational movie or something that can carry my heart away.. Hope to see more kind of this post.

    Reply

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