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Expert answers: Do I pay myself maternity pay as a limited company director?

Readers questions: I am the owner of my Limited company and at the same time I am the only employee of the company. At this moment I am pregnant and I may stop working soon. I do not know what will happen if I stop working and where to go from here. Any advice?

maternity pay as a limited company director

Expert answer: This readers question was answered by Sophie Tyler from Dolan Accountancy.

You can look at claiming Maternity Pay, provided you meet the minimum criteria.

Statutory Maternity Pay can be paid to you, provided;

  • You earn on average at least £118 per week, in salary
  • Have worked for your employer, i.e. your Limited company, continuously for at least 26 weeks continuing into the ‘qualifying week’ – the 15th week before the expected week of childbirth
  • You need to keep proof of pregnancy/the expected birth week on record, usually the MATB1 form provided by your midwife.

Should you qualify, Statutory Maternity Pay (SMP) is paid for up to 39 weeks. Your Limited company would initially fund the SMP, to be later refunded by HMRC, unless you have successfully applied for Advance Funding from HMRC beforehand.

SMP is 90% of your average weekly earnings before tax, for the first 6 weeks. After this, it is £148.68, or 90% of your average weekly earnings (whichever is lower) for the next 33 weeks.

You need to bear in mind that as a Director, and presumably shareholder, you will still have the right to attend meetings and make decisions on behalf of the company, but should not exceed the maximum Keeping In Touch days, otherwise, you could lose your entitlement to SMP.

Claiming Maternity Allowance

Should you not be able to claim SMP, due to not meeting the criteria, you can instead look at claiming Maternity Allowance.

As your employer, your Limited company would need to provide an SMP1 form to state that you were not eligible for SMP. This is needed when sending the claim to the Jobcentre Plus.

In the 66 weeks, before your baby’s due, you must also have been employed for at least 26 weeks (or self-employed) and earning £30 a week or more in at least 13 of these weeks (they do not have to be consecutive weeks).

As a limited Company Director

You will find HMRC have some handy calculators to work out if you qualify for SMP or Maternity Allowance.

Note, your company will need to have a PAYE scheme in place, with yourself as an employee, and this should have been in place throughout the qualifying weeks for the SMP. Dividend drawings do not count towards your average earnings for SMP or Maternity Allowance.

More on ask the experts and maternity leave.

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