Maternity Allowance and self employment: does it need to be reformed?

A growing number of working mums are turning to self employment with mums being one of the fastest growing groups in start-ups, contracting and freelancing.

Tired pregnant woman


This growth is shining a spotlight on the issue of maternity leave for the self employed. In her recent independent review of self employment, commissioned by the Government, entrepreneur Julie Deane talks about the need for a review of maternity pay.

What does she say about it in the report?

She says Maternity Allowance, the maternity pay which most self employed women are likely to qualify for [some, who are owners and employees of their business, may also qualify for Statutory Maternity Pay], should be brought up to the same level as that for SMP, that is, that the self employed should get six weeks at 90% of their average salary followed by the statutory rate rather than just the statutory rate of £139.58 or lower. Currently under MA they get 39 weeks at the statutory rate or less.

This would no doubt make things easier for self employed women, many of whom take very brief maternity leaves because maternity pay is not sufficient to allow them to take longer off.

Another issue is how women keep their businesses going while they are on maternity leave. gets many emails from self-employed women who say they risk losing a business they have often spent years developing if they take maternity leave.   During maternity leave they are able to work for 10 Keeping in Touch days. However, even if they only work for one hour in a day, that counts as a whole day for the purposes of MA. If they do any paid work outside these 10 days they risk losing their MA.

The rules create a lot of confusion.

What have you said?

One woman wrote to saying she was a self-employed artist and regularly sold in galleries, some of which she had spent years building up a relationship with. Although she wouldn’t be working during her maternity leave, the galleries she exhibited in would still be stocking and potentially selling paintings she did before she went on leave. Therefore, she would technically still be earning, even though she wouldn’t be working.

She said: “As there will be no real way of proving that I’m not actually working for these earnings paid during my leave, I’m worried that my Maternity Allowance will be stopped under the assumption that I’m still working.

The only way around this as far as I can see, is to take all my work out of the galleries for the duration of my maternity leave. However, this will potentially jeopardise my relationship with the galleries and, unlike an employer, they are under no obligation to represent me again when I return to work. Consequently, I will be back to square one when I return and my business will suffer massively.”

What does our tax expert say about this?

According to our expert Des Desai there is no problem here because the issue is working, not earning.

However, many women are confused about this. They are often not able to employ someone to cover their maternity leave so ask if they can get a relative or friend to cover their business for no pay during their maternity leave just to keep it ticking over so they don’t have to start again. Des Desai says the questions show how unclear the MA system is and how it can make things difficult for honest people.

Another problem some women encounter is if they claim Small Earnings Exemption. Having an Exemption Certificate means that they are waiving their rights to the full MA and will only get a fraction of the amount.

This often comes as a shock to women who have done so without knowing the impact. Unless they revoke the Certificate and start paying their Class 2 National Insurance during the qualifying period for MA they cannot claim the full MA. They cannot back date their contributions to correct this after the event.

Des Desai says: “There is a salutary lesson here for any would be mum who is self employed. Always pay your Class 2 NI contributions. Then when you do your Tax Return claim a refund if you  are below the Small Earnings Exemption figure using a form CA8480.

Do not apply for an exemption! Making this simple mistake can reduce your Maternity Allowance from nearly £140 a week to just £27 a week.  It is grossly unfair, but the powers that be deem otherwise.”

Things become even more complicated if a woman has two or more self-employed jobs or a job where she qualifies for SMP and another where she only qualifies for Maternity Allowance, no matter how much she earns and how much she has paid in NI contributions.

If she has two jobs and qualifies for SMP in each of them, she can get two lots of SMP. If she has just one job for which she qualifies for SMP and wants to start doing self-employed work she can do this without losing SMP.

However, if she does two jobs and only qualifies for MA in one of them she cannot claim both SMP and MA.  If she has two jobs for which she qualifies for MA, she can only get one lot of MA and cannot do any other self employed work for more than the 10 KIT days without losing that MA.

It’s a system that was designed years ago when there weren’t so many women doing self employed work and not nearly as many doing more than one job, a growing phenomenon in the last few years. If, as Julie Deane argues, MA needs to be brought more in line with SMP, should these other anomalies be addressed too?

What do you think?

Tell us your experiences by leaving a comment below as we are keen to highlight how this affects self employed women and others who only qualify for MA.

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