Tax when on Maternity Leave

Easter_Road

Hi

My wife has been on Maternity leave since last July and someone mentioned that she might be entitled to a tax rebate because she didn't earn the amount she originally planned.

I.e her company took the intial tax based on her working the full financial year when in fact she only worked 4 months of the tax year.

I've never heard (or thought) of this and it seems highly unlikely but thought I would ask for everyones opinion.

Thanks in advance for any help you can give.

Easter Road

ylesia

Hi Easter Road

I do the payroll for a small playgroup and the way tax is calculated is that each month there is a "tax free to date" amount which is based on your personal allowance. For example in April it will be around 1/12th and then May 2/12ths of your allowance etc.

Each month your total gross earnings in the tax year is compared with the tax free to date and the difference will be taxed. So if your income suddenly drops then you should automatically get a tax rebate without asking.

For example I went on maternity leave last November. The first month I was off I was paid 5 weeks at 100% earnings and also 6 days holiday. This put my earnings to date over the threshold for the higher tax band so I was taxed some at 20% and some at 40%. The next month I was paid 4 weeks at 100% and no holidays which put my total tax to date back below the higher threshold so my tax paid in that month including a rebate of the extra tax I'd paid the month before.

I hope that made sense! Having said all that, your wife's company may not have calculated it correctly but they should be using this method.

Hope that helps

Cheers