Family finance

Getting to grips with the new Childcare Vouchers 2017-12-14T16:49:53+00:00

If you’re a working parent, you probably know the most tax efficient way to pay for childcare and the chances are you’re already maximising the benefits available to you. Typical schemes offered by employers are; childcare vouchers (the most popular), direct contracts with childcare providers and workplace nurseries.

However, following the launch of the Government’s new tax-free childcare scheme, there’s now a ‘new kid on the block’.  Although the savings platform will top-up your childcare contributions by 20% (limited to £8,000) – making your money go further – it’s not necessarily the best option for all.

Lemonade Money looked at the stats to see who’s likely to benefit from the new scheme, and who’s better off staying put.

Basic rate taxpayer couple

Working parents Rita and Fred currently pay £400 per month for childcare, each buying £200 worth of monthly childcare vouchers to pay for this, so £4,800 per year. They collectively save £1,536 in tax and National Insurance contributions meaning their vouchers cost £3,264.

If they put £3,264 into the Government’s new savings account (available through the Gov UK website and run by National Savings & Investments), Rita and Fred’s 20% top-up gives them £4,080 – £720 less than what the vouchers are worth.

Higher rate taxpayer couple

Higher rate tax payers Ushmi and Ross currently buy £2,912 worth of childcare vouchers (£1,456 each). The salary sacrifice scheme gives them a collective tax and National Insurance saving of £1,223.04 (£611.52 each), meaning the vouchers effectively cost them £1,688.96.

If they put £1,688.96 into the new childcare account and it was topped up by 20%, they would have £2,111 to pay towards childcare – a loss of £800. For the 20% top-up to match to their tax and National Insurance savings, they’d need to pay in £2,912. This will boost their pot to £3,640 (but remember they’ve already paid tax and National Insurance on this).

Basic/higher rate taxpayer couple

Working parents, Phil and Michelle are paying basic and higher rate, together they can currently buy £4,316 worth of childcare vouchers (£2,860 basic and £1,456 higher). The salary sacrifice scheme delivers them a collective tax and National Insurance saving of £1,526.72 (£915.20 basic and £611.52 higher), meaning their vouchers effectively cost them £2,789.28.

If they put £2,789.28 into the new childcare account and it was topped up by 20%, they would have £3,486.60 to pay towards childcare – a loss of £829. For the 20% top-up to match their tax and National Insurance savings, they’d need to pay in £7,634. Over this, they’re better off (but remember the Government only pays 20% on savings up to £8,000).

Our conclusion

Greater tax and National Insurance savings can be made through childcare vouchers – so stay put unless you’ve got the spare cash to top up the pot further and make the 20% boost work for you.

Self-employed/basic rate taxpayer couple

Working parents Michael and Paula currently pay £500 per month for childcare. Michael is self-employed so not eligible for any schemes and Paula buys £243 (maximum allowed) worth of monthly childcare vouchers to pay towards the cost, so £2,916 per year. Paula saves £933 in tax and National Insurance contributions meaning her vouchers cost £1,983.

Conclusion

Michael and Paula would only need to put £400 per month into the Government’s new savings account, as the 20% top-up on their £4,800 pot would give them an extra £1,200 (enough to cover their yearly childcare). This is more than the £933 Paula saves in tax and National Insurance.

Self-employed/higher rate taxpayer couple

Self-employed and higher rate taxpayers Ben and Natalie currently pay £500 per month for childcare. Ben is self-employed so not eligible for any schemes and Natalie buys £121.33 (maximum allowed) worth of monthly childcare vouchers to pay towards the cost, so £1,456 per year. Natalie saves £612 in tax and National Insurance contributions meaning her vouchers cost £844.

Conclusion 

Similarly, Ben and Natalie only need to put £400 per month into the Government’s new savings account as the top-up on their £4,800 pot gives them an extra £1,200. This is far more than the £844 Natalie saves in tax and National Insurance using the monthly childcare vouchers.

Workers not in schemes

If you, your partner, or both are self-employed it could be a win, win scenario. The self-employed have never been able to pay into a childcare voucher scheme so make the most of this option. The same applies to workers who are not in any company schemes, so seize the opportunity to turn 80p into £1.

Help with finances

From April there will be a change to child tax credit; it will only be paid for the first two children in any household so even more reason to make savings where you can.

If you don’t have the time or inclination to work out what are the best options for you or if you need some help with financial planning, Lemonade Money has a simple voucher/account comparison table on its blog, plus a free financial health tool which enables you to assess how you’re doing in six important areas, including debt planning/budgeting, saving and buying a new home.

For additional support speak to a Lemonade Hero – a financial fitness mentor whose sole purpose is to get your finances on track.

Working out the numbers:
It’s more like a 25% bonus than 20% relief (although they work out to be the same). If you pay in £80 after you’ve been taxed, then you’ll have £100 in your account: 80 x 125% = 100 (the same as basic rate tax relief). Why?
If you earn £100 and pay 20% tax you end up with £80, which you can then pay into the new childcare scheme and it turns back into £100. To calculate what will end up in a childcare account, take the cash paid in from your bank account and multiple by 1.25 or divide by 0.8.

In the News – March 2017

The roll out was announced formally by the Chancellor in his Spring Budget. In his speech he said that two million households will be eligible for tax free childcare by the end of the year. Working families could receive up to £2,000 a year for each child under-12. Under the new system, the government will pay 20% of annual childcare costs.

Those with children aged three and four will also see their childcare entitlement doubled to 30 hours a week, potentially saving them £5,000 a year.

As background for new mums, the new scheme, which will start rolling out next month, will certainly affect new parents. The existing childcare voucher scheme will close to new applicants in April 2018 – however, parents that are signed up to this arrangement before this deadline will be able to continue using this.

In terms of how the new arrangement works, parents will need to open an online account (provided by NS&I) This is done by logging onto the government’s website www.gov.uk. Payments are then made into this account, which is topped up by the government. You can open one account per child up to the age of 12, or 17 if disabled. Deposits of up to £8,000 in each will receive the maximum government contribution of £2,000 (£4,000 if the child is disabled). You, family members or even employers can pay into the childcare account, building up a balance to cover periods where childcare costs might be higher. If you decide to withdraw from the scheme, any money that’s in the account can be taken out, although the government will also stop making contributions.

Mum’s the word on pension rewards 2017-12-14T16:49:53+00:00

Mum’s the word on pension rewards apparently, and with Mothering Sunday being a day dedicated to showing our mothers how much we appreciate and love them for everything they do, this got us thinking about the sacrifices parents unwittingly make for their children.

Commentators suggest if stay-at-home mums were paid for the tasks they perform, such as; chef, driver, therapist, personal assistant, live-in nanny, tutor, house cleaner, private nurse and laundry/ironing operative, they would take home around £160,000 a year!

Mums who go back to work, often on a part-time or self-employed basis, have additional logistical hurdles to jump as they juggle their professional responsibilities with childcare, family-life and running the home.

For a new mum juggling these tasks with the pressures of raising a young family, it’s no surprise to find many do not have the time or inclination to address one crucial area; their future financial wellbeing. And while being a stay-at-home mum has many rewards, your pension is usually overlooked.

According to a report by Insuring Women’s Futures, career gaps to look after children followed by stints of temporary and part-time work can seriously damage your pension pot. The IWF says at age 69, the average man’s pension pot is valued at £179,091 while a woman’s is £35,800. Now that’s a worrying unintended sacrifice!

Even to get the full basic State Pension you currently need a minimum of 30 qualifying years of National Insurance contributions or credits. A significant gap could mean you miss out on the full amount, so it’s worth checking your National Insurance record online to keep tabs on how far off you are from 30 years of contributions, and remember you can buy back some years by making voluntary NI contributions. To check it you’ll need a Government Gateway account, which is easy to set up.

Lemonade Money appreciates the financial pressures having a family puts on savings, so here are a few tips to help you plan ahead and top up your pot:

  1. If you’re in a workplace pension scheme and about to start your maternity leave, don’t worry, your employer will continue to make contributions into your fund for the duration of your maternity leave. That will be for at least 39 weeks, and in some instances longer. If you can afford it, you might also be able to continue making contributions.
  2. If you’re a working mum, calculate the household outgoings with your partner and work out who’s paying what. If you find most of your salary is going on childcare costs and food bills etc, see if these can be shared out. Hopefully this will enable you to divert a proportion of your income (no matter how small) into a personal pension plan. By building up pension entitlement in your own name, you won’t have to rely on your employer’s pension scheme or your partner to bail you out in the future.
  3. If you’re a working mum earning under £10,000 a year, you won’t automatically be enrolled into your employer’s pension scheme, however you can still opt in and you may receive employer contributions.
  4. If you’re a self-employed mum, the chances are you’re ploughing any profits into the home or business, rather than a pension. HMRC however, does not tax your pension contributions so for 20% taxpayers, paying £80 from your taxed income into a pension will result in £100 being invested in the pot for you. For high rate tax payers, the same £100 investment will cost just £60.
  5. If you’re not working, see if the household finances can stretch to your partner paying part of their salary into a personal pension in your name. If you pay up to £2,880 into a personal pension per annum, the Treasury will increase it to £3,600. How? The pension provider claims this extra money – 20% tax relief – from HMRC.
  6. If you’re not entitled to child benefit due to your partner’s earnings, still claim the child benefit in your name as this will entitle you to credits toward the state pension. The child benefit you receive will then be recouped via your partner’s tax return.
  7. And speaking of credits, if are planning to go back to work after the birth of your child and grandparents or relatives are taking responsibility for your baby or toddler’s care, you can transfer your National Insurance credits across to them, boosting their State pension pot. Simply sign a National Insurance credit form and that family member will then receive credits for looking after your child.
  8. If the thought of going through your household budgets leaves you cold, Lemonade Money can help. Online tools make the process easy, there’s a free and quick financial health check so you can see where you’re at financially and if you need extra support, Lemonade Heroes can help you get your finances on track.

As many young mothers will agree, the onset of ‘baby brain’ means it’s easy to lose track of your pension and what you’ve accrued. According to the Government – who’s developing a Pensions Dashboard to keep records in one place – the average person will have worked for 11 employers by the time they retire. Having a single place to view your pension savings will help to ensure payouts don’t get lost.

The Department for Work & Pensions currently estimates there’s £400m in unclaimed savings, but with no definite date for the Dashboard launch it’s worth keeping paper records (where possible) until everything becomes digitised.

With the State pension age increasing to 67 from 2028 and rumours it could be 68 in 2044 and 70 after that, mums will have a long time to wait before they even pick up a basic payout. We think with Mothering Sunday looming it’s time to reward mums sooner and help build that pension pot now.

Babysitters – how much should you pay? 2017-12-14T16:50:16+00:00

Now you may be among the lucky ones who has a team of friends and family members locally who are only to happy to babysit and give you and your partner the chance to escape from being mummy and daddy for a few hours.  However, for many of us who have settled further afield from our relatives, we turn to babysitters.   Do you remember being a babysitter as a teenager? Most of us have babysat at one time or another before having children of our own. It used to go something like this: once upon a time, if you wanted to earn some extra cash, you would knock on a neighbour’s door and offer to babysit. In return, you would get pizza to eat, a VHS to watch and a tenner at the end of the evening. How times have changed.

It’s not news to us that the cost of daytime childcare is high. Without a doubt, these high costs can be a barrier for mums wanting to return to work.  But they could also be a barrier to keeping our social lives and relationships full of sparkle… Just how much is the going rate for a babysitter and what are the factors you should consider when weighing up what you want to pay?

For many of us, the decision on an hourly rate for babysitters often poses a conundrum. Consider that rare event of the married world, the date night. You’ve booked the restaurant table, you’ve found the ideal local babysitter (someone recommended that has spent time with the children and yourself, someone you trust), and you are planning your outfit for that special few hours alone with your other half. (Remember him/her? We know, it’s been a while since you held a glance outside of the mad school run, work rush, parenting routine…).

How many of us recognise this conversation with a potential babysitter:

You: “We would love to have you mind the kids a few nights a month. What is your hourly rate?”

Sitter: “I don’t know. Whatever you want to pay me.”

You: “Well, how much do you make for other families?”

Sitter: “£8 an hour. But they have 3 kids. You have 2.”

And then you’re left with a dilemma. You don’t want to be the neighbourhood Scrooge, but you also don’t want to lose a great sitter – and the chance to go out.

Babysitters in the UK make anything between £6.00 and up to £13.00 per hour. This can add up if you’re planning a day in the country or a night on the town, but it’s a small price to pay for your sanity. (Not to mention the safety of your children).

There are several factors to consider when deciding how much you’ll pay:

  • Babysitter’s Age Pay younger candidates, who generally have less experience, less than you would pay someone older. That said, if a sitter stays with you for many years, increase her wages as her experience increases.
  • Location If you live in a big city, expect to pay more for a babysitter than someone who lives in a small town. Higher cost of living = higher wages.
  • Experience A sitter who knows First Aid and has looked after big groups of children will cost more. And rightfully so! Specialised training should always be rewarded.
  • Number of Children If you have more than one child, expect to pay £2 to £4 more an hour for each additional child. (Which is how we calculate the top end of our range, for looking after 4 children in a London postcode.)
  • Time of Day Pay more if the children will be awake while you’re gone. If the babysitter will put the kids to bed, lock the doors, and watch TV, you can pay less.
  • Activities One child has soccer practice, the other needs to go to the dentist. And they both need to be at the dinner table at 6. Pay more if you are expecting your babysitter to be out and about with your children.
  • Cooking For each meal that is prepared, add extra to the pay rate. You don’t have to pay more if you just want her to order pizza, but leave enough money if she is cooking, for extra ingredients and a little extra cash for her.
  • Transportation If you’re not driving a babysitter from and to her home, give her some extra money for petrol or a taxi.

If you’re still unsure, Care.com has a Babysitter and Nanny Pay Rate Calculator that will calculate the “going rate” for sitters in your area!  As you can see in the infographic below, where you live has a huge impact on what you can expect to pay.  You can see that London comes out as the most expensive urban area at £7.74, with Birmingham, Leeds, Sheffield and Glasgow coming out between £6.03 and £6.45. Cambridge lies somewhere in the middle of these rates.

Baby sitting costs across the UK

So, use the tool as your starting point.  If your babysitter has been recommended by friends, ask them what they’ve paid and go from there.  It’s always a good plan to discuss rates before the babysitter arrives so that you both know where you stand, and that you can focus on the task at hand – getting out and having fun!  You deserve it!

*Research and prices valid in 2015

 

Quick tips for saving family pennies 2017-12-14T16:50:16+00:00

Everyone knows that being a parent is expensive. Nappies, nursery furniture, food bills, utility bills, school uniforms, days out, birthdays – it all adds up, so we spoke to Emily Leary, parenting and family blogger about tips and tricks that shave a little off the cost of living….

Five ways to trim to the family monthly bills:

Make soup, not waste.

In most family’s fridges lurk vegetables that have seen better days and are headed for the trash. Stop! Wash, peel and chop, simmer in stock over a medium heat until soft, attack with the stick blender, add a few dollops of cream, yoghurt or crème fraiche and season to taste. Voila! A family meal from something you were going to throw away.

Plan your meals.

Sitting down and planning what dinners you’ll eat as a family for the week can result in huge savings as you only buy what you need from the supermarket and you use it all before it goes off. It’s also a great way to ensure you all eat healthily every day of the week.

Haggle ’til you save.

Some people think that haggling is a thing of the past or something reserved for market stalls and antique shops. It isn’t. You can save money on everything from electrical items to broadband bills by simply asking for a better deal. Try it – you might just be surprised.

Picnics aren’t just for park visits.

On days out, take a packed lunch with you, even if you’re heading to the cinema, museum or swimming pool. That way, you can sit down after your adventure (on a bench, on the grass, in the car, on the train home) and enjoy lunch together, without spending a fortune in the overpriced cafe.

Always have a free Plan B.

Research a list of free and low cost venues and activities and have them handy in your bag all the time. That way, if you decide on an impromptu treat after a trip to the dentist or between school pickups, you can go ahead without making too big a dent in your bank balance.

Well-known writer and presenter, Emily is fronting the first ever dedicated parenting channel from a money-saving website.  The series of parenting and lifestyle videos, hosted on a dedicated YouTube channel include areas such as upcycling, cutting the cost of utility bills, affordable healthy eating and how to entertain children during school holidays on a budget.

For more tips and advice visit Emily on her blog A Mummy Too

Be canny with your money, mummies! 2017-12-14T16:50:17+00:00

Life as a family doesn’t come cheap!  From the early days of stocking up on baby equipment, nappies and baby clothes to the teen years with demands for pocket money, laptops and the latest mobile phone, each stage of parenting brings with it certain financial pressures, but there are ways to cut a few corners, save a few pounds and leave a little extra in the pot for some family fun….

Money conscious mum of one Natalie Cooper was named Online Bargain Hunter of the Year 2014 and became dedicated to scrimping after her daughter, who’s now three, was born.

From coupons to testing products, 24-year-old Natalie knows all the tricks of the trade and has shared her top seven tips when it comes to saving money as a parent.

1. Use money saving websites

Search for deals and coupons on money saving websites such as PromotionalCodes.org.uk. Taking the time to search for the products you might have otherwise paid full price for can really pay off. Sometimes you can even get some really nice freebies like make up and toothpaste.

2. Use baby clubs to get freebies

Baby clubs such as Ella’s Kitchen offer free goodies such as cuddly toys, weaning spoons and lots of money off coupons just for signing up.

3. Become a product tester

Becoming a product tester means you get to try the latest products completely free and usually keep them!  NowBaby has a Parent Panel of mums and dads just like you.  We’re testing new products all the time and we want parents’ honest opinions so reviews are unbiased and unedited.  If you’re interested in becoming a product tester for NowBaby, simply email Lisa – Product Review team with your details and they’ll add you to the panel, simple hey?!

You can also sign up to sites such as Bzzagent.co.uk and you’ll get sent very generous sized samples and sometimes even full sized products such as baby food and cosmetics to try.  In return they ask you to review the product you have been sent. The site even tailors the products to fit around those that you use and so it is really easy and quick to do. You can even do it in the evening when your children are in bed.

4. Sign up to loyalty cards

The biggest saving for most parents can be made on the little things. Lets face it, we get through hundreds of baby wipes and nappies.  Most major shops now offer some sort of loyalty card scheme which means you can get money back just for doing your weekly shop. Accumulated over time these points can make a real difference when you’re doing a big shop.

5. Compare your shopping

Use MySupermarket.com to compare your shopping costs between supermarkets.  The site compares the cost of buying the same products from Asda, Tesco, Sainsbury’s, Morrisons, Waitrose, Aldi and Ocado, which means you’re sure you’re getting the best deal for your money.

However, make sure you remember to take into account the cost of the fuel used to get to your supermarket.

6. Give out praise

As a parent you’re always busy, but if you have some free time in the evening sit down with a cup of tea and write a few emails to your favourite companies saying how much you like their products.  You’d be surprised how far a little bit of praise can get you. Companies really enjoy receiving good feedback and will often send you complimentary vouchers or samples in return.

Don’t forget to put your address on the end. Try to be different by sending a photo, recipe, or drawing from your child.

7. Keep tabs on your savings

Perhaps Natalie’s biggest and most important tip to parents is to keep track of what you’re saving and enjoy it.Put every penny you save using a coupon in a jar or savings account and watch it grow.  It might start off as something small, but before you know it you will have accumulated a decent sum of money which can help pay for days out, holidays, or even your children’s future. More importantly, it will motivate you to continue saving.

For more tips check out Natalie’s blog here or see her tips on Twitter @Coupon_Nat.

Paternity : what pay and leave can Dad’s have? 2017-08-07T18:41:15+00:00

A woman carries the baby, gives birth to the baby and is expected to have some time away from work to care for the baby, but what about Dads?  What paternity rights to pay and leave do men have when their partner gives birth?  We’re going to look at the pay and leave options for fathers….

If you are the baby’s father, the husband or partner of the mother, the adoptive father or the intended parent of a baby born through surrogacy and will be taking time off to look after the child, you may be eligible for paternity leave.  In order to quality, you’ll need to meet the following conditions:

  • be an employee
  • have worked for your employer continuously for at least 26 weeks by the end of the 15th week before the expected week of childbirth (known as the ‘qualifying week’)
  • give the correct notice

How long can Paternity Leave last?

Standard paternity leave is either 1 or 2 weeks (even if your partner has had twins, triplets or more).  If you’re part time, a week’s leave will reflect the days/hours that you usually work.  Your paternity leave doesn’t have to be taken immediately, but it must be after the baby is born and within 56 days of the birth.

You’ll need to tell your employer at least 15 weeks before the baby is due, and inform them of the baby’s due date, when you’d like your leave to start and whether you’d like 1 or 2 weeks.  This is also a good time to request Paternity Pay.

Will I get Paternity Pay?  How much?

In order to qualify for Paternity Pay, you need to meet the following requirements:

  • have worked for your employer continuously for at least 26 weeks by the end of the 15th week before the expected week of childbirth (known as the ‘qualifying week’)
  • be employed by your employer up to the date of birth
  • earn at least £112 a week (before tax)
  • give the correct notice

As with SMP, Statutory Paternity Pay is set at £139.58 or 90% of your average weekly earnings, whichever is lower.

 

 

Your maternity: Maternity Allowance explained 2017-12-14T16:50:21+00:00

If you’re not eligible for SMP, you may be entitled to Maternity Allowance instead.  If you’re self employed, have recently stopped working or haven’t been with your current employer for long enough to qualify for SMP, you’re in one of the categories that may qualify for Maternity Allowance.

Who is eligible and for which type of Maternity Allowance

If one of the following applies to you, you may be eligible for the 39 week Maternity Allowance:

  • you’re employed, but you can’t get Statutory Maternity Pay
  • you’re self-employed and pay Class 2 National Insurance (including Voluntary National Insurance) for at least 13 of the 66 weeks before your baby’s due – the amount of Maternity Allowance you get depends on how much Class 2 National Insurance you’ve paid
  • you’ve recently stopped working

In the 66 weeks before your baby’s due, you must also have been:

  • employed or self-employed for at least 26 weeks
  • earning (or classed as earning) at least £30 a week over any 13-week period

You might get Maternity Allowance for 14 weeks if for at least 26 weeks in the 66 weeks before your baby is due:

  • you’re married or in a civil partnership
  • you’re not employed or self-employed
  • you take part in the business of your self-employed spouse or civil partner
  • the work you do is for the business and unpaid
  • your spouse or civil partner is registered as self-employed with HM Revenue and Customs (HMRC) and should pay Class 2 National Insurance
  • your spouse or civil partner is working as self-employed person
  • you’re not eligible for Statutory Maternity Pay or the higher amount of Maternity Allowance (for the same pregnancy)

How much will I get?

This will depend on your eligibility as there are two types of Maternity Allowance, each is paid every 2 or 4 weeks into your bank account:

  • Up to 39 weeks – £139.58 per week or 90% of your average weekly earnings (whichever is lower)
  • Up to 14 weeks – £27 a week

When can I claim?

You can make a claim for Maternity Allowance once you’re 26 weeks pregnant, and payments can start from 11 weeks before your baby’s due date.

The www.gov.uk website has a maternity entitlement calculator to work out how much you could get.

Your maternity: Maternity Leave explained 2017-12-14T16:50:21+00:00

Ok, so you are pregnant, you have your due date and you have a job.  When can you /should you finish work and how long are you allowed to take off?  You’ll need to find out about Maternity Leave and what you’re entitled to….

Maternity Leave

This is the time you take off of work just before and after the birth of your baby.  Whilst all women MUST take two weeks’ leave (four if you work in a factory), you are actually entitled to a total of 52 weeks (this won’t necessarily be paid time – see Statutory Maternity Pay for more information).

Maternity leave is made up of the first 26 weeks (Ordinary Maternity Leave), followed by the last 26 weeks (Additional Maternity Leave).

Irrespective of how long you’ve had your job, how many hours you work or how much you get paid if you’re an employee and give the correct amount of notice (28 days), you’re entitled to Statutory Maternity Leave.

How early can my leave start?

Of course if your baby makes a surprise early appearance, this is one you won’t have to worry about, as your Maternity Leave will begin the day after the birth.  Usually the earliest your leave can start is 11 weeks before the expected date of delivery.

What arrangements do I need to make?

You’ll need to give your employer written notice, at least 15 weeks before your due date, providing your due date and when you’d like your leave to start.  Your employer must then write to you within 28 days to confirm these dates.

The www.gov.uk site has a maternity planner to work out the earliest date your maternity leave can start, when you need to claim your maternity leave and the dates for Ordinary and Additional Leave.

Your maternity: Statutory Maternity Pay explained 2017-12-14T16:50:22+00:00

Pregnant!!  Excited? Yes.  Anxious? Yes.  Confused?  Absolutely!!  The rules and regulations about maternity leave, maternity pay, paternity leave seem to be in constant flux.  So exactly what is Statutory Maternity Pay (SMP) and what are you entitled to?

What is SMP?

In its most basic form, SMP is a weekly payment that your employer is required to pay you when you take time off work to have your baby.  In order to qualify for it, you must:

  • have been in continuous employment for at least 26 weeks by the time you reach the 15th week before your due date (this is referred to as the qualifying week)
  • earn on average at least £112 per week
  • give at least 28 days’ notice and provide the date you’d like your SMP to start
  • provide proof that you’re pregnant – a letter from your doctor or midwife or a MATB1 certificate, which you should receive from your midwife around 20 weeks before your due date.

You can work out your qualifying week using this calculator on the www.gov.uk website.

How much maternity pay will I get?

SMP starts on the first day of your maternity leave (if you’ve been off work with a pregnancy related illness, it will automatically start 4 weeks before the week your baby is due).  You will then be paid SMP for up to 39 weeks in the following way:

  • Weeks 1-6:  90% of your average weekly earnings (before tax)
  • Weeks 7-39:  £139.58 or 90% of your average weekly earnings (whichever is lower)

Your SMP will be paid just as your normal salary is, weekly or monthly and will also be subject to tax and NI.  Your employer is obliged to write to you within 28 days of your notice confirming the amount of SMP that you will get, the start date and the end date.

If things go wrong

If your baby is born early or you lose your child after the 24th week of pregnancy or after the birth, your SMP will not be affected.

My workplace has a maternity scheme

If your workplace runs a maternity scheme, you may get more than the statutory amount, your employer is free to offer you more money based on company policy but can’t pay you less than the amounts outlined above.