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!

How to Apply for a Tax Refund from HMRC

Millions of people paid too much tax in the last tax year which finished on April 5th.
Are you one of those people who are now entitled to a tax refund?
Read on and find out!

1)  Find your final Tax Code for 2014 / 2015
If you haven't had it already, your P60 (the end of year statement) detailing your earnings in the job you were in on 5th April should be handed to you soon (and legally you have to have it by 31st May).  
If you had more than 1 job on 5th April you should receive a P60 from each job as long as you earned more than £109 per week or £473 a month at least for one pay period.
  
On your P60 you will find your final tax code.  If you don't have your P60, dig out your final payslip from the last tax year or your P45 from the last job you had.  Is the tax code 944L with nothing after it?  In that case it is unlikely you are due anything back (but read on as it might be worth checking just in case!).

If the tax code has an X or a "month 1" after it, it is possible you may be due a tax refund.

2)  Is your code different to 944L and do you know why?  
Perhaps you had 2 or more jobs and your tax allowance was split.  Perhaps you paid Basic Rate (20%) tax at one job and had all of your taxable allowance at another.
Perhaps you received taxable benefits in your job (health care insurance etc).
Perhaps you receive a pension as well as income from your job.

If it is different and you don't know why, call HMRC on 0300 200 3300 and ask them to explain.

3)  Check the Figures
It's always worth checking the figures on your P60, even if your tax code seems to be correct.

HMRC have a useful tax calculator on their website.   

4)   Contact HMRC
If you think a refund is due, hopefully HMRC are already aware too, but it's definitely worth letting them know that you know as they are not fond of sending out cheques!
Give them a call on 0300 200 3300 and tell them that you think you have overpaid tax for the last tax year.


Alternatively, you can write to them instead and enclose a copy of your P60, final payslip or P45.  
Send the letter to: 

HM Revenue & Customs

Pay as You Earn

PO Box 1970

Liverpool

L75 1WX

If you would like a FREE draft letter to send, please send an email to info@zestpayroll.co.uk and I will send you one.


PLEASE REMEMBER:  
It is up to you to keep HMRC informed if you change your name or address.  
If you need to update your information visit: 

www.hmrc.gov.uk/report-changes/individual/name-address.htm

©    www.zestpayroll.co.uk          May 2014

Paternity Pay & Leave 2013 / 2014

New Dads (or the partners of new mothers) are entitled to 2 weeks Ordinary Paternity Leave when the baby is born and may be entitled to Ordinary Paternity Pay while they are away from work.

To qualify for Ordinary Paternity Leave, he must have been with his employer for at least 26 weeks by the end of the 15th week before the baby is due.

He must also be either the:

• Biological Father

or

• Mother's husband or partner (including same-sex relationships)

He needs to let his employer know he wants to take paternity leave by the
fifteenth week before the baby is due.
A Self Certificate (form SC3) to pass to his employer can be printed off from the HMRC website:  

www.hmrc.gov.uk/forms/sc3.pdf


Ordinary Paternity Leave should either be taken as 1 week or 2 consecutive weeks. It can not be split.

Paternity leave can not start until the baby is born and must be taken within 56 days of the baby being born.

 
Ordinary Statutory Paternity Pay (OSPP)
If the father/partner qualifies for Ordinary Paternity Leave, and earns more than £107 a week, he qualifies for Ordinary Statutory Paternity Pay (OSPP) too.
This is paid at £136.78 per week or 90% of his average weekly earnings if they are less than this.

Your Employer may offer additional Paternity benefits so check your contract and speak to your HR department.



Additional Paternity Leave & Pay
Since April 2011, fathers/partners also have the right to up to 26 weeks' Additional Paternity Leave if the child's mother has returned to work before the end of her Statutory Maternity Pay period. This is in addition to the 2 weeks Ordinary Paternity Leave they are entitled to.
He may also receive Additional Statutory Paternity Pay if the child's mother has returned to work before the end of her maternity pay period.
Additional Paternity Leave can be taken from 20 weeks after the child is born.
It must finish before the child's first birthday.
Additional Statutory Paternity Pay is paid at the same weekly rate as the OSPP and can be paid for a maximum of 19 weeks (to complete the Statutory Maternity Pay period of 39 weeks for the mother).  For more info see: www.gov.uk/employers-additional-paternity-pay-leave

Self Employed New Dads

Unfortunately, there is no paternity pay equivalent for self employed dads (which is rather unfair
I think!).

For more information visit:

www.gov.uk/paternity-pay-leave

Great websites for dads-to-be and new dads are:

www.dad.info

www.daddynatal.co.uk