So you are having baby… or you already have children
This is the FAQ for you if you have children, or planning on having or adopting a child. It can help guide you through the minefield of free child care, maternity pay, maternity allowance, paternity pay and tax free childcare…
If you or your partner are pregnant or planning on getting pregnant
Being a business owner it can be a strange time when you start thinking about having children, you already have one baby – your business right! Now you are thinking about another – one that doesn’t pay you though!
The first question we often get asked is how does maternity pay work and how much do I get? The answer to that as with all things accounting wise isn’t simple. It depends on your current set up but here goes:
- If you are paid a salary via PAYE and you have been for over 26 weeks (usually limited companies)
- a. If you are the mother will be entitled to 90% of you average pay for 6 weeks and then £145.18 (or 90% of pay if it is less) for the following 33 weeks
- b. If you are the partner of the mother or father of the child you are entitled to 2 weeks paternity pay – set at £145.18. https://www.gov.uk/paternity-pay-leave
- c. Your business can then reclaim 103%* of this Statutory Maternity/Paternity pay (SMP)*92% if the class1 NI bill is >45k for the business
- d. More info: https://www.gov.uk/employers-maternity-pay-leave
- You are not an employee (Sole trader/ Partnerships) or have been employed for less than 26 weeks at your current employer
- a. If you are eligible you will get £145.18 for 39 weeks
- b. Eligibility depends on lots of things including:
- • Having paid enough Class 2 NI
- • In the 66 weeks before your babies due, you:
- • have worked for at least 26 weeks
- • earned or classed as earning at £30 a week for at least 13 weeks
- c. More info: https://www.gov.uk/maternity-allowance
What is shared parental leave?
Shared Parental Leave can give parents more flexibility in how they share the care of their child in the first year following birth or adoption. Parents are able to share a pot of leave. They can decide to be off work at the same time and/or take it in turns to have periods of leave to look after the child. For more information on eligibility please see here:
Ahh!!! The baby is here can I get some more help
Once the baby is born if you and your partners salary is <50k* per annum you are entitled to Child Benefit. You will get £20.70 per week for the first child and £13.70 per week for any additional child. For the finer detail: https://www.gov.uk/child-benefit
* if you or your partner earn over 50k per annum then you only get a % of the amounts above and once you get to £60k you receive nothing – this all needs to be declared on your tax return so worth speaking with your accountant about it if you are near or over the threshold
So the child is ready to go into childcare. Most first time parents get a huge shock when they see how much childcare costs are – and it’s a reason lots of parents might not go back to work until there child is at least preschool age, the government are trying to help and have recently launched a tax free child care account and increased the number of hours of funded (free) childcare,for working parents, from 15 hours to 30 hours (preschool age only)
Tax free childcare account and Childcare Vouchers As long as you and your partner earn less than £100k each a year you can set up a tax free childcare account. For every £8 you pay in the government pays in an extra £3. It is possible to get up £2000 government support for each child. You then pay your eligible childcare provider directly from the account. More info: https://childcare-support.tax.service.gov.uk/par/app/eligibility
There are also some workplace schemes call Childcare vouchers which parents can pay into from their gross salary (so before tax). These are being phased out – but for some parents they work out better than the Government schemes – so they are worth investigating.
30 hours funded childcare
All 3 and 4 year olds in the England get 15 hours free childcare a week (term time only!). If the parents live and work in England then you may be entitled up to 30 hours free child care (whoop). As with everything there are eligibility criteria that need to be fulfilled – please take a look here: https://childcare-support.tax.service.gov.uk/par/app/extendedentitlement
All figures correct at 18/04/2018. As with everything there are lots of caveats and quirks so please read the separate links for the full picture.