Freelancers’ Questions: Does Maternity Allowance come with an earnings cap?

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Freelancer’s Question: I read your helpful maternity rights article for freelancers and the self-employed, but unfortunately it still did not answer my queries!

My situation is that I’m currently employed with an agency and due to go on maternity leave in March. My income will only be supplemented through Maternity Allowance.

I’m considering building up my freelance work while I’m on maternity leave but when should I inform my employer that I am intending to go freelance? I wonder if this is laid down in law or whether there is a best-practice per industry. Plus are there tax considerations for the employer which might suggest when, precisely, I should hand in my notice?

Penultimately, and more for myself, will my notice timing affect my maternity allowance and do I need to inform HMRC? Lastly, I’m interested to know if I can earn while receiving MA or whether there is an earnings threshold I need to keep my earnings under. Thanks!

Expert’s Answer: Firstly, I’ll start with my personal recommendation (as an accountant to freelancers and not a lawyer to such self-employed workers,) regarding handing in your notice.

When to leave your job (check what your employment contract says)

Your employment contract may allow you to undertake other work while employed by that employer. If the contract permits it, then you would not need to hand in your notice. Contracts may allow for other work to be undertaken, provided you let the employer know and that they agree, or allow you to do other work, provided it does not conflict with the employer’s business or affect your ability to perform your duties for the employer.

If your contract doesn’t permit you to do other work, then you should look at handing in your notice, so that you leave prior to undertaking any freelance work.

As to whether there are tax considerations for your employer regarding your maternity support, no, there aren’t any tax considerations for the employer related to the timing of your notice.

You say 'Maternity Allowance,' but have you considered 'Statutory Maternity Pay'?

Regarding whether your Maternity Allowance will be affected, a bit of a refresher may be needed. You are only paid MA if you do not qualify for Statutory Maternity Pay (SMP)

To qualify for SMP you must:

  • Carry out 26 weeks of continuous work with your employer, ending on the 15thweek before your ‘due date’
  • Inform your employer of your pregnancy 15 weeks before the due date.
  • Provide proof of pregnancy
  • ,

A tip on your timing if you are eligible for SMP

If you think you will qualify for SMP, then you should speak to your employer. Note, if you cannot undertake freelance work while employed (because your contract states that you cannot), you might consider timing your leaving date to ensure you achieve the 26-week continuous work requirement with your employer, ending on the 15th week before your due date.

Bear in mind, as long as you've already qualifiedforstatutorymaternity pay,you'll still get it, even if youleaveyouremployment.

MA: three hoops to jump through

And if you don’t qualify for SMP, then you should apply for Maternity Allowance, the criteria for which are:

  • You are employed and can't get SMP
  • You are self-employed and pay Class 2 National Insurance
  • You recently stopped working
  • ,

    In addition, please be aware that in the 66 weeks before your baby is due, you must have been employed or self-employed for at least 26 weeks and earning (or classed as earning) £30 a week -- or more, in at least 13 of those weeks (which do not have to be consecutive).

    The earliest you can claim is at the start of the 14th week before the week your baby is due.

    An earnings threshold, of sorts

    You are half onto something when you ask about an earnings threshold. Once you have qualified for either SMP or MA, there is fortunately no earnings threshold to worry about -- but there is a restriction on the number of days you can work.

    This is because SMP and MA are intended to provide an element of financial compensation while on maternity leave. In particular, employees are allowed to work 10 days during their maternity leave period, as Keeping in Touch Days (KIT) without it affecting the entitlement to SMP. These days are referred to in the FreelanceUK article that you linked to.

    Similarly, if you are in receipt of Maternity Allowance (MA), any work, whether self-0employed or for any employer, counts as one KIT day.

    Beware the risk of your maternity money being stopped

    Finally, be aware that if you are in receipt of MA and work any days beyond the 10 KIT days, then there is a real risk that your MA will stop, for at least the number of days that you work in excess of the 10 KIT days. It doesn’t matter who the work is for or if it is on a self-employed basis. It is at the discretion of Jobcentre Plus, the body which administers MA, to determine whether you should be disqualified from receiving MA for a reasonable period as a result of working beyond the 10 KIT days. But hopefully that won’t happen. Good luck with everything!

    The expert was Graham Jenner, founder of chartered accountancy firm Jenner & Co.

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