Maternity pay and tax rates

rachliddy

Hi. Hoping someone out there can help me. I am expecting out first child in September and my maternity pay is kicking in from mid August. I am currently a higher rate tax payer. By my calculations, I will have overpaid on tax by the time the financial year ends (having April to July as full months pay) and SMP for from Aug to Feb. Does anyone know how I get my overpaid tax back? I don't plan to go back to work for my previous employer, will it be sorted out in my next job? Will I get taxed at the higher or lower rate of tax for my SMP payments? Any info gratefully received as I can't seem to find any answers on the IR website. Thanks

littletiger

When this happened to me the I.R. automatically sent me a rebate at the end of the financial year.

WestonDave

It will unravel naturally by the end of the tax year because of the cummulative way tax is calculated (as opposed to each month as a seperate exercise).

Not easy to explain this but suppose you were paid £100,000 in April and then nothing for the rest of the tax year. In April you'd get 1/12 of your annual allowance untaxed, 1/12 of £2k (roughly) at 10% and 1/12 of £30K(ish) at 22% with the rest at 40%.

In May although you haven't been paid anymore it would be recalculated and you now get 2/12ths of each to work out the figures resulting in a tax refund which would be paid in that month, and so on through the year.

This is probably totally double dutch but trust me it will work itself out naturally. Your SMP will be added in as part of your cumulative income as the year goes on.

Jarvisma

It will already have sorted itself out before the end of the tax year, so you won't have overpaid.

You will pay normal (high) tax April to July, then as soon as you have a big drop in pay in August (& poss another drop in Sept depending on dates) this will be recognised and you will get a small rebate probably in August, then your tax will drop to the appropriate amount from September until February.