How much of maternity weekly pay counts as income (for tax credits)

cm00

Hi,

I'm posting this because I've seen two very different answers to this question, so i'm not sure if the system was changed recently.

Let's say I receive £140 a week for Maternity pay. How much of this weekly payment do I count as income on my tax credits claim form?

pmlindyloo

Although Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and
Statutory Adoption Pay (SAP) are taxable, you should take off up to £100
for each week of payment from your income for tax credits purposes.
For example, if you only got £80 Statutory Maternity Pay in any week, you
should only deduct £80 for each week, from your income.

Working and child tax credits guide.

So in the case you quote you deduct £100 per week.

Darksparkle

There have been no changes.

Where are you reading?

If you receive £140 SMP you declare £40.

cm00

Darksparkle wrote: »

There have been no changes.

Where are you reading?

If you receive £140 SMP you declare £40.

Ok I see. Something else I am confused over is the wording on the government website regarding maternity pay and tax credits: https://www.gov.uk/guidance/tax-credits-working-out-income - it says...

Step 1: work out your gross pay

(Do you add maternity payments into this?)

Then it says

Step 2: what to take off your gross pay


Statutory Maternity, Paternity or Adoption Pay If you received more than £100 for a week, only include £100 for that week



So it is saying to add up your maternity pay figure (max £100 a week) and then subtract that from your gross pay (in step 1)

Now that seems weird to me, why would you subtract the amount from your gross pay from step 1? Unless you included all of your maternity pay earnings into the step 1 figure. But it doesn't say you should do that. So how does it work?

It seems like you're allowed to subtract £100 per week for maternity pay from your yearly income, without even including that £100 per week into the total year income. This doesn't seem right... What I mean is not counting the first £100 per week of maternity pay into your total yearly income makes sense, but subtracting the first £100 per week from your total yearly income doesn't make sense.

Darksparkle

Maternity pay would already been included on your P60.

cm00

Darksparkle wrote: »

Maternity pay would already been included on your P60.

You don't send your p60 when applying for tax credits though do you? I thought you tell them what your total yearly income will be. If maternity is just starting I would therefore have to contact the tax credits office and tell them what my revised total income number will be. Basically any weeks I worked that year, plus anything above £100 weekly from maternity, etc?

Darksparkle

cm00 wrote: »

You don't send your p60 when applying for tax credits though do you? I thought you tell them what your total yearly income will be. If maternity is just starting I would therefore have to contact the tax credits office and tell them what my revised total income number will be. Basically any weeks I worked that year, plus anything above £100 weekly from maternity, etc?

You don't send the P60 but the claim form asks your for your total income for last tax year.

You take this from your P60 and make any relevant deductions.

It's fairly straightforward - P60 minus (number of weeks on SMP in tax year x £100).

So if 39 weeks then deduct £3900 from your P60.

If the change is in this tax year then you provide an estimated income for now and follow the steps above when completing your renewal.

cm00

Darksparkle wrote: »

You don't send the P60 but the claim form asks your for your total income for last tax year.

You take this from your P60 and make any relevant deductions.

It's fairly straightforward - P60 minus (number of weeks on SMP in tax year x £100).

So if 39 weeks then deduct £3900 from your P60.

If the change is in this tax year then you provide an estimated income for now and follow the steps above when completing your renewal.

I don't mean to set up a new claim. I mean that I will have to contact them when maternity starts because my job income will be significantly less for that year due to taking off 9 months (or possibly even 12 months) for maternity. If I take off 12 months my job income for that year would be virtually 0. Obviously this means i can't just deduct 100 per week from my previous year job income because I'd end up receiving tax credits for that year as though I was earning a full wage, even though I'd have no wage at all (no wage at all if I take 12 months maternity).

Let's say my employment income is around 13k a year. I take off 9 months from work for maternity, starting in mid april. That means my income for this year isn't 13k, because for 9 months I didn't earn my wage.

This means my job income for this year is only whatever I earn in that 3 months, which is let's say £3000, not £13000. So I assume as soon as I finish work for maternity I would contact the tax credits office to report my job income for this year as £3000 and then add £40 * 39 that i received in excess of the £100 maternity weekly pay.

So I'd put total income for the year as £3000 (job income) + £1560 (maternity income that is above £100. weekly) I know my usual job income would be £13000 but for this year I only earn money from employment for 3 months due being on maternity for 9 months.

Is this correct?

cm00

I found what I was talking about in my first post. The goverment website tax credit calculate says to include the first £100 from maternity pay each week into your total income.

Here's a screenshot of this:

I'm not sure what to do now. People keep saying only include the first £40 each week as your total yearly income, but the government website says to include the first £100 each week.

cm00

Here's the plain text from the above screenshot. As you can clearly see, it says to add £100 each week from maternity pay into your total yearly earnings when calculating tax credits.

Tax credits calculator

Earnings and income: you

Enter your earnings and income details between 6 April 2015 and 5 April 2016. If a box does not apply to you leave it blank.
If you're employed, your total earnings from all your jobs before tax and National Insurance.

Statutory Maternity, Paternity or Adoption Pay. Only include the first £100 a week of any Statutory Maternity, Adoption or Paternity Pay

How to work this out

If your payments are more than £100 a week, enter £100 in the box for each week. For example, if you got them for 30 weeks, enter £3,000.
If your payments are less than £100 a week, enter the amount you got. For example, if you got £80 for 30 weeks, enter £2,400. Don't include Maternity Allowance.

Profit from self-employment (If you made a loss enter '0').

Taxable social security benefits.

Total other income before tax, eg pensions, but not maintenance.

Darksparkle

You are making this more complicated than it needs to be. Take a step back and start again.

You add up everything you receive from your employer. That's wages, holiday pay, SMP etc. We'll call that figure A.

Then work out how many weeks in the tax year you'll be on SMP (max 39 weeks). Times this by £100. That's figure B.

Then it's simply Figure A minus Figure B.


Or. . . . . .

Add up everything you receive from your employer - wages, holiday pay etc but only include £40 per week of the SMP.

The figures are exactly the same.

So an example.

I earn £1000 per month. I work for 3 months so earn £3,000. I then have 9 months SMP so £5,460 so in total £8,460.

I can then deduct £3,900 from my income leaving me with income to declare of £4,560.

Or. . .

I earn £1000 per month. I work for 3 months so earn £3,000. I then have 9 months SMP but only include the £40 each week so £1,560. The total income is still £4,560.