SMP and tax allowances: ask the expert

I need some advice on SMP. I am due to give birth in November. I am the director and only employee of my business and as an employer will soon be applying for an advance payment of SMP from HMRC. As the 39 weeks of SMP fall in this tax year and the next I was planning to apply for 19 weeks advance payment this tax year and then 20 weeks advance payment next tax year to avoid paying tax on next year’s allowance (as I know the business will be put on hold for a while and I won’t reach my threshold for taxable income). My question is: can I apply for an advance payment of the whole 39 weeks this tax year as a company, but only pay it to myself in the next tax year to avoid paying unnecessary tax on it? My other question is if I claim SMP for the first couple of months and then decide to close the limited business to go back to being self-employed can I then make a claim for maternity allowance even though I will have been employed during the qualifying period and will have already received some SMP?

I understand what you are trying to do and what you want the outcome to be. Lets see if this clarifies matters.

You receive SMP if you are working and Maternity Allowance if you are not. MA also applies if you cannot prove your income such as being newly self employed.

As it stands, about 30 weeks of your SMP fall in this tax year.

Payment of a lump sum is an agreement between you and the employer (in this case, one and the same). Sometimes company do it to ease admin or payroll processing.

If you are a one man/one woman company, you should be able to arrange your affairs to suit your own needs. The answer could be a dividend, or your directors’ loan account. Ask your accountant.

You cannot receive retrospective tax refunds if you pay the entire SMP this tax year. Going self employed should allow you to claim Working Tax Credit or Child Tax Credit, depending on your family finances.

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