It's tricky enough returning back to clinical sessions, so it's good to get your tax in order first.
Last month’s article was on new mothers and the financial aspects of maternity to consider, so I thought it would be appropriate to consider the return from leave this time. As our client manager, Amy James ACA, has just returned from her own maternity leave, I’ve asked her to write it for me!
Statutory maternity pay (SMP)
After the 39th week of maternity, your statutory maternity pay (or your Shared Parental Leave pay, as the case may be) will have ended.
Before officially returning to work you may wish to phase yourself in and so it is handy to remember that, if your employer agrees, you are entitled to work up to 10 ‘keep in touch’ days without affecting your statutory maternity pay. These days will be paid at your normal rate and are therefore a good financial top up. Alternatively, as you continue to accrue holiday during your maternity leave, you may wish to use your annual leave to extend your maternity leave or use a certain number of days per week initially whilst you get used to your new routine.
If instead you were claiming Maternity Allowance
Your maternity allowance will automatically stop when you reach the end of your Maternity Allowance Period (either 14 weeks or 39 weeks).
As with maternity pay, a self-employed mother can also work up to 10 days during the Maternity Allowance Period without losing any Maternity Allowance. You are free to decide yourself whether to do any work or not. You should record these days and inform Jobcentre Plus of these days.
On officially returning to work you should inform the Jobcentre Plus so your Maternity Allowance is stopped as appropriate.
Covering childcare on your return to work is expensive but the government’s tax-free childcare scheme can help to relieve the financial burden of paying for childminders/nurseries/school clubs etc – for both those who are employed and self-employed.
The scheme allows you to get up to £500 every 3 months (£2,000 a year) for each of your children to help with the costs of childcare. Under this arrangement, the government will top up 20% of childcare costs – and this can be claimed alongside ’30 hours free childcare’ if you are eligible for both.
To be eligible for tax-free childcare
- You should be working
- You should be earning an amount over the national minimum wage but you and your partner must each earn under £100,000.
- Your child should be under 11 years old
- You should be UK resident and allowed to access public funds
Detailed criteria can be found on the government website along with instructions on how to apply.
In total you are able to use the scheme to help pay for up to £10,000 of childcare per child each year – giving you an extra £2,000 per child each year (or more if your child is disabled).
However, if your child is approaching 3 years of age, you should first consider your eligibility for 30 hours free childcare since the saving is likely to outweigh that under the tax-free childcare scheme.
Your own tax position
If you are an employee you should have received tax refunds when you had no income for a while but had paid tax earlier in the tax year. Provided you have a cumulative code, it should work out fine at the end of the year.
However, when you return to work if you have had no income in that tax year, your first month or two may have unusually low tax deductions until you’ve used up the cumulative allowances for the year to date. It will return to normal levels afterwards, so be prepared for higher deductions (similar to before you went on leave).
You should update HMRC with details of any qualifying professional subscriptions, or training courses (if you are under a training contract only) that you will incur in the tax year so that your tax code can be adjusted accordingly.
If you are self-employed, as mentioned in the previous article, you will need to be very careful regarding the levels of your payments on account. If your taxable income increases as a result of your return from maternity leave then it is possible (or perhaps likely) that your payments on account will not cover your tax liability and so you will need to ensure enough tax has been saved to cover the larger balance due by the end of the January following the tax year of return. For example, if you didn’t work much in 2018-19 and returned in June 2019, you may not have had to make payments on account for 2019-20, or only low amounts, and you would be likely to have a larger balance of tax to pay by 31 January 2021.
It would be advisable that you let your accountant have your tax information as soon after 5 April as possible so that you have plenty of time to save for your tax. Returning to work is stressful enough without worrying about unknown tax liabilities.
Liz Densley is medical specialist partner with Sussex Chartered Accountants, Honey Barrett, and is secretary of AISMA (the Association of Independent Specialist Medical Accountants). Contact her at firstname.lastname@example.org.