Maternity pay allowance guide for self-employed

Introduction

What is maternity pay?

Maternity pay is the financial support offered by the government to the to be mums. There is a difference in the way government supports an employee or a self employed individual. This is due to the fact that employees have more statutory rights towards their employer as opposed to a self-employed individual who is on their own being their own boss.  

Understanding and getting maternity pay can be more challenging for self-employed as they have to understand and manage it themselves.

Who is Self-Employed

It is important to distinguish between an employee and a self-employed. A self-employed is someone who work for themselves.  Determining the employment status is crucial for self-employed individuals as it directly affects the rights, benefits, and obligations they are entitled to. A self employed has control over the way how to work, when to work and how much to work as compared to an employee who does not enjoy that freedom.

Maternity pay options for individuals who run their own company

If you work for your own company as a director/employee you have different choices when it comes to maternity pay. Understanding these options and their respective qualifying conditions can ensure that you maximize your entitlement while navigating the journey of parenthood as a self-employed individual.

1. Statutory Maternity Pay (SMP)

Statutory Maternity Pay (SMP) is a weekly payment from your employer. If you meet the qualifying conditions, you can pay yourself SMP through your company. These conditions are:

• You’ve worked for your company continuously for at least 26 weeks up to any day in the ‘qualifying week’ – the 15th week before the expected week of childbirth.
• Your average weekly earnings are at least equal to the lower earnings limit for National Insurance contributions.

If you are an employer and want to know more about statutory maternity pay, please visit HMRC on Statutory Maternity Pay and Leave: employer guide: Entitlement – GOV.UK (www.gov.uk).

2. Maternity Allowance (MA)

In case you are not eligible for SMP, don’t worry. As a self-employed individual, you can claim Maternity Allowance instead. The eligibility criteria for claiming Maternity Allowance include:

• You’re employed or self-employed for at least 26 weeks in the 66 weeks leading up to your due date.
• You’ve earned over £30 per week on average during this period.

• The allowance is payable for a period of up to 39 weeks.
• It offers a weekly rate, providing a steady income stream to help compensate for the lack of maternity leave entitlement.

For many self-employed individuals, Maternity Allowance becomes an essential part of their financial planning during pregnancy and early motherhood, ensuring they can take necessary time off without the stress of completely losing their income.

Claiming Maternity Allowance as a Self-Employed Individual

Maternity Allowance (MA) is a financial lifeline for self-employed individuals who are expecting. Here’s how to understand the eligibility criteria and navigate the claim process:

Qualifying Conditions for Claiming Maternity Allowance

To be eligible for Maternity Allowance, you must meet the following conditions:

1. Self-employment status: You must be registered with HMRC as self-employed.
2. Work history: You have worked for at least 26 weeks during the 66 weeks before your baby’s due date.
3. Earnings: Your average weekly earnings should be at least £30 over any 13-week period.

Earning Requirements and National Insurance Contributions

Full Rate of MA

To receive the full rate of MA, you need to have paid Class 2 National Insurance contributions for at least 13 of the 66 weeks before your expected week of childbirth.

Lower Rate of MA

If you haven’t paid enough Class 2 NI contributions, you might still get a lower rate of MA.

Steps Involved in Claiming Maternity Allowance

Here are the steps you need to follow to claim Maternity Allowance:

1. Determine your eligibility based on your employment status, work history, and earnings.
2. Calculate your average weekly earnings over a chosen 13-week period.
3. Gather necessary documents like your proof of income and medical reports confirming pregnancy.

Completing Form MA1 or Contacting the Job Centre Plus Claim Line

To initiate your Maternity Allowance claim, you have two options:

1. Form MA1: Obtain and fill out form MA1 from the government’s website or your local JobCentre Plus office. You can access maternity allowance claim form by using the link Maternity Allowance claim form – GOV.UK (www.gov.uk).
2. JobCentre Plus: Alternatively, call the JobCentre Plus claim line at 0800 055 6688 for guidance through the process.

By meeting these conditions and following through with these steps, qualifying for Maternity Allowance should be straightforward. Ensure that all documentation is accurate and submitted in a timely manner to avoid any delays in receiving your entitlement.

If your spouse or civil partner assists in your business, a lower rate of £27 per week may apply. Earnings are treated as £184.03/£30 per week based on National Insurance (NI) contributions record.

Contrary to popular belief, there’s no need to provide proof of earnings when claiming MA based on self-employment. This makes the process significantly easier and less stressful.

Your eligibility for MA and the applicable rate are verified through your NI contributions record and a test period. The test period typically spans 66 weeks before your baby’s expected birth week. During this time, you should be gainfully self-employed and have paid Class 2 National Insurance contributions.

Remember, understanding these key points will ensure that you’re well-prepared when it comes time to claim your Maternity Allowance as a self-employed individual.

Conclusion

Understanding maternity pay as a self-employed individual can be complex. Generally, A self-employed is entitled to maternity allowance subject to conditions rather than maternity pay. Specialist advice is invaluable in ensuring you understand your rights, meet all requirements, and make the most of the benefits available to you. If you are self-employed and expecting a baby and need help in claiming maternity allowance, contact Pearl Accountants with confidence. Pearl Accountants specialise in tax advice to self-employed.