Maternity pay as a lump sum??

heather_helo

do u work for a small or large employer - (defenition over 50 employees or nic payments over 40k). small employers can get 103% of all smp paid, so if they do lump sum payment in this tax year they would get the entire statutory payments back in this tax year - a big advantage to an employer - large employers i think get 92%.

not sure about the post re paying in april - it depends on your payroll processing date (the day your pay gets calculated) i.e you may get payroll processed on 15th of month for a payment at end of month - which would mean leaving date would be 31st march but you wouldnt get the cash until april i.e new tax year, this could be to your advantage as could get tax back sooner through jobcenter, although student loan/nic could be a battle to get back.

Alibali

heather_helo wrote: »

do u work for a small or large employer - (defenition over 50 employees or nic payments over 40k). small employers can get 103% of all smp paid, so if they do lump sum payment in this tax year they would get the entire statutory payments back in this tax year - a big advantage to an employer - large employers i think get 92%.

not sure about the post re paying in april - it depends on your payroll processing date (the day your pay gets calculated) i.e you may get payroll processed on 15th of month for a payment at end of month - which would mean leaving date would be 31st march but you wouldnt get the cash until april i.e new tax year, this could be to your advantage as could get tax back sooner through jobcenter, although student loan/nic could be a battle to get back.

My employer would be classed as a large employer. Ive checked my wage slip, feb's pay was pay run 11, so March will be 12 and April's will be pay run 1 so will fall in to the new tax year. I definately expect a battle to get the student loan deductions back.

What do you mean though, about getting the tax back through the job centre? I thought you had to claim it via HMRC

heather_helo

when your smp ends as this would be after the 9mths from next month (within the same tax year) if you are not back in employment you can go to jobcenter and should get a tax rebate as you would be entitled to job seekers, which is an income and therefore you would get a tax rebate on previous income tax paid. if your back in work you can get the tax back from new employer

heather_helo

pending on p45 date could probably claim sooner,

chrisbur

"the girl from HR reckoned that as they would process me as a leaver on the 31st March and pay me the lump sum in April's payroll, they would not have to deduct tax/NI or student loan payment.....this didn't seem right to me and she was waiting to check with someone from payroll.....could you shed any light on this?? "

This raises some new issues. I cannot imagine that they will pay this without making any deductions, but they may I suppose make the payment after they have issued the P45. This would mean that this payment was not included in the P45 figures and would not be sent to the tax office untill after April 2013, so would delay your claim for a rebate.

"And I am assuming that my employer pays 13.8% employers national insurance on the full amount? if so, this may go in my favour as I work for quite a large charity, so as you can imagine money is tight and they would have to part with approx £776? is that right? "

Yes employers NI would be about this but paying month by month would result in some employers NI. Rough calculation I would say about £170 so by paying lump sum costing them an extra £600 aprox.

" lump sum would be £6250.07 in total.

If my figures are right, the student loans company will get £450 of this.

If anyone is able to shed any light on how much tax & NI would be taken off this that would be great."

Assuming you have the basic tax code and are not in a contracted out pension.....
if payment done in month 1 before P45 is issued tax 1657 NI 403 student loan 450
if payment done month 1 after P45 has been issued tax 1926 NI 403 student loan 450

zzzLazyDaisy

chrisbur wrote: »

"the girl from HR reckoned that as they would process me as a leaver on the 31st March and pay me the lump sum in April's payroll, they would not have to deduct tax/NI or student loan payment.....this didn't seem right to me and she was waiting to check with someone from payroll.....could you shed any light on this?? "

I suspect that the girl from HR is thinking of the tax and NI situation in relation to severance payments. Which is basically that the payment is made after the P45 is issued, and is paid free of tax up to £30,000. No NI is payable on severance payments.

I have no idea whether statutory maternity pay can be included as part of a severance payment, but if so, that is one way to solve the problem. I don't know if student loans can take a proportion of a severance payment.

chrisbur

zzzLazyDaisy wrote: »

I suspect that the girl from HR is thinking of the tax and NI situation in relation to severance payments. Which is basically that the payment is made after the P45 is issued, and is paid free of tax up to £30,000. No NI is payable on severance payments.

I have no idea whether statutory maternity pay can be included as part of a severance payment, but if so, that is one way to solve the problem. I don't know if student loans can take a proportion of a severance payment.

This may be what they are thinking of but I doubt if they would get away with it from the employers guide...
"25 Payments of SSP, SMP, SAP, OSPP
and ASPP

For both PAYE and NICs purposes

SSP, SMP, SAP, OSPP and ASPP must be included in

gross pay at the time it is paid. PAYE and NICs are


then worked out in the normal way"

The £30000 exemption is for certain defined payments with no mention of SMP.

But did turn up something that may be usefull to the OP in the employers guide. Page 23 of....
http://www.hmrc.gov.uk/guidance/cwg2.pdf

"26 Payments of SMP, SAP, OSPP and
ASPP to an employee after their

contract of service has ended

For NICs purposes

If you pay SMP, SAP, OSPP or ASPP to an employee

after their contract of service has ended or you

pay it:


•

in a lump sum – work out NICs using a weekly

earnings period unless the lump sum is paid

with the last regular payment of earnings. In

that case, add the two payments together and

work out NICs using the earnings period used

before the employee left"

This seems to me to say that a lump sum payment is worked out using a weekly earnings period not the earnings period that applied to their normal salary. This would give an NI figure of about £190 for the lump sum rather than £403 if worked on a monthly earnings period. Still a bit more than they would pay if it was paid monthly but an improvement. It would also add about £70 to the employers NI.

Alibali

chrisbur wrote: »

But did turn up something that may be usefull to the OP in the employers guide. Page 23 of....
http://www.hmrc.gov.uk/guidance/cwg2.pdf

"26 Payments of SMP, SAP, OSPP and
ASPP to an employee after their

contract of service has ended

For NICs purposes

If you pay SMP, SAP, OSPP or ASPP to an employee

after their contract of service has ended or you

pay it:


•

in a lump sum – work out NICs using a weekly

earnings period unless the lump sum is paid

with the last regular payment of earnings. In

that case, add the two payments together and

work out NICs using the earnings period used

before the employee left"

This seems to me to say that a lump sum payment is worked out using a weekly earnings period not the earnings period that applied to their normal salary. This would give an NI figure of about £190 for the lump sum rather than £403 if worked on a monthly earnings period. Still a bit more than they would pay if it was paid monthly but an improvement. It would also add about £70 to the employers NI.

Does this change the tax implications?

chrisbur

Alibali wrote: »

Does this change the tax implications?

It will not alter the amount of tax that is due for the year, but may increase the amount taken from the lump sum. This extra will eventually be refunded, when will depend on when your employer issues the P45 ie before or after the lump sum is paid.

Employers are allowed to issue the P45 after the payment of a lump sum rather than when the contract ends details are in the paragraph after the ones I quoted from the employers guide.