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Self employed maternity pay and maternity allowance
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Self-employed maternity pay and maternity allowance

A drop in income is often a major worry for expectant parents, especially if you’re self-employed. Understanding what you can claim, and preparing as early as possible, will certainly help to lower your stress levels.

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A drop in income is often a major worry for expectant parents, especially if you’re self-employed. While there can be major benefits in working for yourself when you’re raising a family, the restrictions around self-employed maternity pay and maternity allowance are less than encouraging.

Understanding what you can claim, and preparing as early as possible, will certainly help to lower your stress levels. Which means you can make the most of any maternity leave you decide to take from work.

The two main ways the UK government attempts to support the income of new parents are through Statutory Maternity Pay (SMP) and Maternity Allowance (MA). But if you’re self-employed, your eligibility will depend on whether you’re a sole trader, limited company director, or a contractor.

As you can only claim either SMP or MA at any given time, it’s important to understand which will give you the most benefit as a new parent. Especially as they are subject to different tax rules. And currently self-employed new mothers don’t get the same level of initial payments as if they were employed, which IPSE is campaigning to change.

Maternity Pay for the self-employed

If you’re considered to be a self-employed sole trader, then you typically aren’t eligible for Statutory Maternity Pay (SMP). The exception can be if you’re working as a contractor or freelancer deemed to be inside IR35 or via an umbrella company. In this case, you’re seen as working as an employee for tax purposes, and will therefore be eligible for minimum levels of pay, holidays, statutory maternity leave and SMP.

It's important to make sure you’re clear on your IR35 status, and IPSE members have access to a specialist tax helpline to clarify the situation.

To generally qualify for Statutory Maternity Pay you need to earn on average at least £125, provide proof of pregnancy within 21 days of your SMP start date (either a letter from your doctor or midwife, or your MATB1 certificate), and have worked for your employer continuously for at least 26 weeks continuing into the ‘qualifying week’, the 15th week before the expected week of childbirth.

If you’re paying yourself a salary as a director or employee of your own company, then you can pay yourself SMP as long as you meet the normal qualifying conditions.

One potential problem with paying yourself Statutory Maternity Pay will be if you’re the sole director and shareholder of your limited company, as you might not have anyone to keep the business running while you’re going through pregnancy and childbirth. Unless you already have employees or savings in place, one option may be appointing a temporary director if funds allow it. While you’re claiming SMP, you can only work on your business for up to 10 days (known as Keeping-in-Touch or KIT days)

It’s also worth considering that maternity pay is subject to the same taxation rules as any other employment income. That means you’ll pay tax and National Insurance on those payments.

Every individual situation will be different, so it’s a good idea to speak to specialist financial advisors about your particular circumstances. And IPSE members get discounts and other offers from our expert partners, who specialise in working with the self-employed.

How much is Statutory Maternity Pay?

At the time of writing, Statutory Maternity Pay is paid for up to 39 weeks, either weekly or monthly in the same way as your wages, with tax and National Insurance deducted.

It’s calculated as:

  • 90% of your average weekly earnings (before tax) for the first 6 weeks
  • £187.18 or 90% of your average weekly earnings (whichever is lower) for the next 33 weeks

Payments usually start when you take maternity leave, or automatically if you need to be off work for a pregnancy-related illness in the four weeks before the week (Sunday to Saturday) of the expected due date.

How much is Statutory Maternity Pay

Maternity Allowance for the self-employed

If you’re self-employed in any capacity you can be eligible for Maternity Allowance for up to 39 weeks. This includes if you’re been registered as self-employed for at least 26 in the 66 weeks before your baby is due, earning at least £30 a week as an employee for the same time period, or even if you’ve recently stopped working. You can check your status using a tool on the Gov.uk website.

When you’re self-employed, you can claim between £27 and £187.18 per week, with the amount calculated on the Class 2 National Insurance Contributions (NIC) you’ve made across those 66 weeks before your baby is due. 

Initially you may get £27 for a few weeks while your contributions are linked to your application. If you’ve not paid any Class 2 NIC, it will then stay at that amount. After you initially apply, HMRC will contact you and explain how many additional contributions you could make to be eligible for the full amount of Maternity Allowance.

Unlike Statutory Maternity Pay, your Maternity Allowance is tax free, so it doesn’t need to be included in a Self Assessment tax return.

While you’re receiving Maternity Allowance, you can work for up to 10 days, called ‘Keeping-in-touch’ or ‘KIT days’. Working for part of a day will count as a full day of work, and exceeding that limit will disqualify you from part or all of your payments, so you’ll need to keep records of your time.

If you return to work but then need to take more time off, Maternity Allowance should still run in the background for up to 39 weeks, so payments can be restarted during that period. And it’s not impacted by invoices being settled for work completed before you start your leave.

How Maternity Allowance impacts other benefits

If you’re currently claiming other benefits and support, these may be impacted by claiming Maternity Allowance, although the total amount you receive will normally increase or at least stay the same. It will also be included in the calculations for the total benefit cap applied to most people under state pension age.

Benefits which may be impacted include Universal Credit, bereavement benefits, Carer’s Allowance, Carer Support Payment, Council Tax Reduction, Employment and Support Allowance (ESA), Housing Benefit, Income Support and Jobseeker’s Allowance (JSA).

If you’re claiming childcare vouchers as a contractor or via a limited company, then these will also be impacted while you’re claiming Maternity Allowance.

How Maternity Allowance impacts other benefits

How to apply for Maternity Allowance

You can apply for Maternity Allowance once you’ve been pregnant for 26 weeks. And you’ll need to supply the following documentation:

  • A completed Maternity Allowance MA1 claim form (available here).
  • Proof of a due date and birth (Your original MATB1 certificate, a letter from your doctor or midwife on headed paper or a birth certificate if your baby has already been born.
  • Employees need to send 13 weeks of payslips, but when you’re self-employed HMRC will check your National Insurance Contribution record instead.

A decision should be made within 20 working days. If you’re denied and want to challenge the decision, you can ask for a mandatory reconsideration.

How to apply for Maternity Allowance

What if your partner is self-employed?

If you’re the spouse or civil partner of someone who is self-employed, and you help in their business, you are entitled to the lower rate of Maternity Allowance of £27 per week for 14 weeks. 

How IPSE can help with Maternity Pay and Maternity Allowance

 

This guide is for information purposes only and should not be treated as legal or financial advice. You are strongly advised to get personal legal or financial guidance about the individual circumstances of your situation.

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