Self Employed? Protect Your Right to Maternity Allowance

Filling in a form to claim Maternity Allowance when you are a self employed Mum sounds pretty straight forward, but there is a MAJOR issue if you hold a Small Earnings Exemption Certificate.  A major issue that could see you losing out on thousands of pounds!

I came across this fantastic article by Frances Weir on Helen Lindop's great website www.businessplusbaby.com and felt I had to share it with you - it is too important to miss if you are a self employed mum-to-be or thinking of becoming one. 
A HUGE thank you to Frances and also Helen for letting me feature it.

The rules state that you must register with HMRC as self-employed within 3 months of starting trading. When you register, you will be given the choice of either:

• paying Class 2 national insurance contributions (currently £2.75 per week),

or

• completing a Small Earnings Exception Certificate (if you expect your earnings to be less than £5,885 a year), thus not pay any national insurance.

You can choose to pay Class 2 contributions regardless of how low you expect your income to be. But (if eligible) the obvious temptation for start-ups is to opt for the Small Earnings Exception Certificate – it saves you £2.75 a week at a time when you’re unlikely to be making any profit.

However, this has huge financial implications in terms of Maternity Allowance.

If you have been registered as self-employed for at least 26 weeks in your ‘test period’ (the 66 weeks before your due date), you’ll get some MA. If you have paid Class 2 contributions for at least 13 weeks in your test period, you’ll get the maximum rate (£138.18 a week for 39 weeks). But if you have held a Small Earnings Exception Certificate you’ll only get the minimum rate (£27 a week for 39 weeks); a huge £4,336.02 difference over the maternity period.

As a comparison, 13 weeks of Class 2 contributions costs £35.75 – go do the maths!

And here’s the important small print: for any week you have held a Small Earnings Exception Certificate, you’ll only ever qualify for the minimum MA, even if you have been voluntarily paying Class 2 contributions as well (this is to stop you getting pregnant and then paying Class 2 contributions in order to get maternity allowance!). If you want to work the system in this way, you must get your Small Earnings Exception Certificate cancelled first. The cancellation takes about a month to process so obviously you would want to do this soon after getting pregnant to ensure you have a clear 13 weeks of paying Class 2 contributions without holding a Small Earnings Exception Certificate, within your test period.

Not sure you will get pregnant? Opting to pay Class 2 contributions is a no-risk strategy – you’re entitled to reclaim the contributions made in a financial year if you subsequently find that your earnings fall below the £5,885 threshold of the Small Earnings Exception Certificate (if you plan to do this, look into it early on to ensure you meet the deadlines involved).

Don’t forget, Class 2 contributions also count towards other important benefits for the self-employed mum – the basic state pension, employment and support allowance and bereavement benefit.

I hope this clears up some of the confusion regarding MA. There is a great deal of mis-information on the internet – I’ve seen articles on mumpreneur websites recommending that start-up business mums opt for the Small Earnings Exception Certificate without any discussion of the impact it has on maternity benefits. Self-employed mums need to be aware of the financial implications of holding a Small Earnings Exception Certificate if there is any chance they might become pregnant in the future. And if anyone reading this is pregnant but holds a Small Earnings Exception Certificate, act fast to extinguish it!

This article is not applicable to women who are both self-employed and employed.
Please check the latest advice from the Department of Work and Pensions before relying on information presented here.

Frances and Helen are on a mission to make sure every self employed mother gets the maternity pay they are entitled to, so please spread the message!

Minor Edition - Ipshita Chatterjee

My name is Ipshita and I design children’s dresses (2-6 years), using ethically sourced fabrics from India. I have a four year old daughter who has inspired me to start my business Minor Edition.

I grew up in a very creative family and so it was no surprise when I finally started my own business. My mother has her own boutique designing clothes that are individually hand-painted by her, for the last 30 years. All my childhood outfits were all handmade by her.

I think the tipping point was when I wanted a birthday dress for my little girl, that was both unique and affordable. It made me think that there must be other mums like me who are looking for affordable pretty dresses in different hues other than pink. When my daughter was about two years old, I decided to give up my long career in science and launch my own business. I have always enjoyed stitching and designing clothes ever since I remember, and this transition seemed natural. I travelled to India for inspiration and first-hand knowledge.

Few months later, Minor Edition was born - out of a love for beautiful textiles, bright colours and quirky mix and match of colourful fabrics, buttons, lace and other trimmings.

I work around the school hours since my little one has started school in September 2011. I do work till late nights or early morning and weekends, to catch up.

My business allows me to be creative and be my own boss. I can conveniently schedule all my work. I can manage a work life balance to a great extent. I have learned to start and run a business and love networking and social media as well. I am starting to enjoy the return and the satisfaction when the dresses sell.

There is nothing negative about my job because I love it and I am very passionate about it. I sometimes miss the office banter and evening drinks, though. The positives are way too many to actually even mention those.

The greatest fear of ‘what ifs’ before starting a business is a major obstacle that we all face and it must be overcome. If you have a talent or a good idea, it is important to do a market research however small and then have the courage to make a head start. It is also very important to be passionate about your business, believe in it and be proud of it. We all know that hard work and persistence always pays off. My greatest challenge till date is to work around very limited resources and that is where creativity (using social networking, offering your expertise in return to theirs like photography, web designing etc) helps.

 Website: www.minoredition.co.uk

Facebook Page:  www.facebook.com/pages/MINOR-EDITION/354791904037

Twitter: @minor_edition