Cutting back for maternity leave

sweaty_betty

Hi there - I'm trying to put a budget-type thing together for a friend of mine who has just announced a pregnancy. She already has one child, so doesn't need to buy much, uses re-usable nappies and is hoping to breastfeed.

We're trying to work out how much money she will have coming in and what the difference will be between now and maternity leave. She's hoping to take 9 months of mat leave, but it may be less, depending on finances.

So far we have:

• Basic SMP at ~£125 per week / almost £500 per month
• She will cut back on her pension contributions (saving around £200 per month)
• There will be an extra £13 (?) of child benefit per week
• She won't need to worry about commuting costs (although they're not much anyway)
• She does regular checks on fuel charges to make sure she has a good deal and the mortgage is fixed at a good deal for the next couple of years
• She has no debts (other than the mortgage)

Is there anything else obvious that she could save on?

Will she be eligible for tax credits during maternity leave (she isn't currently eligible)?

Will she have to wait until the end of the financial year to claim any tax rebate?

What are the pros and cons of taking a payment holiday on her mortgage (if her bank allows it)?

She's obviously going to try to save as much as possible between now and maternity leave, but both she and her partner are keeping to tight budgets at the moment and there's not a great deal left over at the end of the month.

Thanks

Mrs_Soup

Payroll offices usually try and adjust the tax while you are on SMP so it is all evened up at the end of the tax year. You can end up on negative tax- ie getting a rebate of previously paid tax. SMP is taxable though so if she has already reached her personal allowance when she goes on leave the SMP will be taxed.

sweaty_betty

Mrs_Soup wrote: »

Payroll offices usually try and adjust the tax while you are on SMP so it is all evened up at the end of the tax year. You can end up on negative tax- ie getting a rebate of previously paid tax. SMP is taxable though so if she has already reached her personal allowance when she goes on leave the SMP will be taxed.

Thanks - I'd not realised that.

Crabapple

If she does a check on http://www.entitledto.co.uk/ she may be able to find out if she is eligible for any tax credits.

You have to apply with your previous years income though (both parents as they are together) and then go back to them to get it based on current income because of maternity.

https://www.gov.uk/government/collections/tax-credits-entitlement-tables

That link might be a better place to start to see if they will be near the income thresholds.

ETA - The child benefit rate for 2nd and subsequent children is £13.55 a week.

LilElvis

Mrs_Soup wrote: »

Payroll offices usually try and adjust the tax while you are on SMP so it is all evened up at the end of the tax year. You can end up on negative tax- ie getting a rebate of previously paid tax. SMP is taxable though so if she has already reached her personal allowance when she goes on leave the SMP will be taxed.

This is incorrect - any tax free allowance is spread equally over the whole tax year ie 1/12 or 1/52 of the allowance per pay period (unless taxed on a week1/month1 basis, denoted by an X suffix on the employee's tax code)

The payroll department may be prepared to model the pay, but I would expect the net pay to be boosted as a result of the drop in pay triggering tax refunds. If the maternity leave continues into the new tax year then it would probably be free of tax, even though it is taxable, as it is likely to be below the threshold at which tax becomes payable (dependent on tax code).

Holiday entitlement continues to accrue whilst on maternity leave so one suggestion would be to take some of this at the end of the leave. For example, she could technically return to work after 8 1/2 months and then take 2 weeks paid holiday. This would mean she could take the 9 months of leave she wants, but receiving her normal pay for the final 2 weeks. This could also be done at the start of her maternity leave if she still has leave available.

ahomemadetouch

she may be entitled to tax credit but will need to call them and give the correct income figures for the tax year or they will assume its the same as last year.
also SMP only lasts 9 months so if she wants the full year off shes going to have to budget for 3 months without pay
her work should allow up to 10 keep in touch days - these are paid and a handy way to earn a bit of extra money i didn't do all 10 but i used a few for training.

sweaty_betty

Thanks all - that's really helpful. I can't remember what happened when I was on mat leave re pay and tax and am now wondering if I'm due a rebate!

In terms of spending less on maternity leave - in my day (only a few years ago) we could go to the sure start centres, library story times etc which were either free or quite cheap. From what I understand many are now closed down. Are there any tips for an inexpensive mat leave? The baby is due around spring time, so hopefully walks will be an option, but any other ideas would be great.

Thanks again.

kingfisherblue

Child benefit will obviously only start once the baby is born. Any additional items needed for the new baby (apart from mattress and car seat) can usually be obtained from Freecycle - my daughter has almost everything via Freecycle, and clothes from Ebay bundles. She might also be able to get clothes and toys for the older child from Freecycle or Ebay.


She could do the downshift challenge (moving down a brand on groceries). Obviously some things are worth paying for a brand name, but others can easily be downshifted.


Greengrocers tend to be cheaper than supermarkets for fresh fruit and veg. Things like pasta and toilet rolls can be cheaper if bulk bought. Nicky are a great loo roll, three ply, but cheap (£2 for 9 or £3.99 for 18, from Home Bargains, B&M, or Farmfoods). Poundstretchers, B&M and Home Bargains are cheaper for several foods. They make you realise how much supermarkets charge.


Does she have Sky or Virgin TV? Does she use the extra channels? It might be worth downsizing the package. Mobile phone packages might be able to be reduced as well.


There is a sticky on the Debtfree Wannabe board. It might be worth her reading through a few threads for ideas.

Timeflies

I'm trying to do the same thing - my income currently comfortably pays all the bills and mortgage with plenty spare for food & other spending, but SMP won't even pay the mortgage :eek:

I'm trying to save up each month, in readiness for the drastic drop in income. Weekly SMP would only equate to 21 hours a week at minimum wage.:eek:

The only thing I think I've been successful at in saving pennies is getting hand me down & cheap maternity clothes, and not spending what I would normally spend on clothes for work etc.

Maybe another thing is we haven't really bought anything for the baby yet, and will try to stick to the basics.

It's a tough balance because to some extent you want to use your remaining months of independence before a first child to enjoy time as a couple, going to places that will be difficult with a small child, but live frugally too.

If anyone else has any good money saving ideas, I'd love to hear them!

sulphate

I'm 21 weeks pregnant atm so this is at the forefront of my mind.

So far I haven't found Ebay and Freecycle useful in my search to save the pennies. Our town's Freecycle is very small and my wanted posts so far have gone unanswered. I noticed that baby stuff is snapped up quickly on there when it is advertised, before I've even seen the post. With Ebay you are obviously limited too, for example I couldn't find a pair of over the bump jeans in the size/style I wanted so ended up buying them new. I bought a snowsuit for £9 including P&P last week from there and thought I was getting a bargain - until I saw a brand new one in Tesco for £2 more. I noticed too that people get into bidding wars for things like that on there and end up paying way more than they probably want.

The most valuable advice I've been given so far is:
- only buy what you need as you go along, don't buy things you "think" you might need
- only buy what you need for the first few weeks at home because people will give you things and you will notice some things you need more than others
- don't buy too many packs of the same brand of things like nappies and wet wipes in case baby is allergic to a specific type
- buy things gradually i.e. one pack of nappies/wipes/maternity towels/breast pads in the food shop every so often, you probably won't notice the tiny extra cost
- I read on another forum about someone who couldn't afford the pram she wanted so bought a cheaper one only to find that it didn't suit her needs so bought another, a year later she'd gone through 4 prams and spent more than she would have on the pram she originally wanted. Sometimes it's worth saving a little extra to get something you know you will use/suits you

Regarding payment holidays on mortgages, she will need to speak to her provider regarding their rules but ours will only let you take a payment holiday if you have overpaid in the past. Cons include not knowing what the monthly payment will be when you start paying it again. It may not be worth doing.

RAS

Check out holiday accrual?

During her may leave she will accrue her notmal holiday entitlement. So she could "return to work" and take 3 weeks paid leave towards the end of the mat leave.