Self Employed? Protect Your Right to Maternity Allowance

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This post was last updated on 30 July 2014 by Claire Meredith of Zest Payroll.

Did you know the level of maternity allowance (MA) you get as a self-employed mum does not depend on how much you earn from your business?

Self-employed mums can only get the maximum rate (£123.88 a week) or the minimum rate (£27 a week) – a big difference. The rate you end up receiving depends on a decision you make regarding national insurance when you first register as self-employed. Today, self-employed mum Frances Weir explains the implications of getting that decision right.

The rules state that you must register with HMRC as self-employed within 3 months of starting trading. When you register, you will be given the choice of either:

  • paying Class 2 national insurance contributions (currently £2.75 per week),

or

  • completing a Small Earnings Exception Certificate (if you expect your earnings to be less than £5,885 a year), thus not pay any national insurance.

You can choose to pay Class 2 contributions regardless of how low you expect your income to be. But (if eligible) the obvious temptation for start-ups is to opt for the Small Earnings Exception Certificate – it saves you £2.75 a week at a time when you’re unlikely to be making any profit.

However, this has huge financial implications in terms of Maternity Allowance.

If you have been registered as self-employed for at least 26 weeks in your ‘test period’ (the 66 weeks before your due date), you’ll get some MA. If you have paid Class 2 contributions for at least 13 weeks in your test period, you’ll get the maximum rate (£138.18 a week for 39 weeks). But if you have held a Small Earnings Exception Certificate you’ll only get the minimum rate (£27 a week for 39 weeks); a huge £4,336.02 difference over the maternity period.

As a comparison, 13 weeks of Class 2 contributions costs £35.75 – go do the maths!

And here’s the important small print: for any week you have held a Small Earnings Exception Certificate, you’ll only ever qualify for the minimum MA, even if you have been voluntarily paying Class 2 contributions as well (this is to stop you getting pregnant and then paying Class 2 contributions in order to get maternity allowance!). If you want to work the system in this way, you must get your Small Earnings Exception Certificate cancelled first. The cancellation takes about a month to process so obviously you would want to do this soon after getting pregnant to ensure you have a clear 13 weeks of paying Class 2 contributions without holding a Small Earnings Exception Certificate, within your test period.

Not sure you will get pregnant? Opting to pay Class 2 contributions is a no-risk strategy – you’re entitled to reclaim the contributions made in a financial year if you subsequently find that your earnings fall below the £5,885 threshold of the Small Earnings Exception Certificate (if you plan to do this, look into it early on to ensure you meet the deadlines involved).

Don’t forget, Class 2 contributions also count towards other important benefits for the self-employed mum – the basic state pension, employment and support allowance and bereavement benefit.

I hope this clears up some of the confusion regarding MA. There is a great deal of mis-information on the internet – I’ve seen articles on mumpreneur websites recommending that start-up business mums opt for the Small Earnings Exception Certificate without any discussion of the impact it has on maternity benefits. Self-employed mums need to be aware of the financial implications of holding a Small Earnings Exception Certificate if there is any chance they might become pregnant in the future. And if anyone reading this is pregnant but holds a Small Earnings Exception Certificate, act fast to extinguish it!

This article is not applicable to women who are both self-employed and employed. Please check the latest advice from the Department of Work and Pensions before relying on information presented here.

Source: Department of Work and Pensions

Confused by whether you can work during your maternity pay period or not? See Frances’ post Self-employment during your maternity pay period

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Comments

  1. elizabeth steward says:

    Ref maternity allowance – when I fell pregnant with my first child in 2008 I held a small earnings exemption certificate and had not paid class 2 contributions for 3 yrs so only qualified for the minimum amount of MA. In August 2009 I contacted the DWP and arranged to backdate all my missing class 2 contributions and set up a DD to pay Class 2 contributions from Sep 2009. At the time of the phone call I made it clear to the advisor on the phone that I was doing this to avoid losing any MA or any other benefit for that matter in the future. At no point was I warned or advised to cancel my exemption certificate. I then fell pregnant in JAN 2010 and subsequently made a claim for MA in first week of July. After a delay of 5 weeks and several phone calls chasing the jobcentre I received a letter stating I was only eligible for the minimum MA payment of £27 per week because I still held an exemption certificate.

    I cancelled my certificate as soon as I could on 14th August in an attempt to ensure I had 13 weeks of Class 2 Ni payments and earnings – my test period. I held lengthy discussions with not one but 2 different staff within DWP who stated that I could backdate the cancellation of my exemption certificate. All I needed to do was to request this in writing which i did specifying a date when I wanted the certificate to cease. It would seem reasonable to me that the cancellation date be backdated to Sept 2009. However when I chased up this matter again over the telephone I was told that backdating such a cancellation was not possible.

    I feel i have been let down by the DWP and jobcentre who are applying rules for rules sake and not treating my case with some common sense. I was able to backdate my NI contributions because I had gone back to work after my first child, and therefore could afford to make the back payments. It also made sense at the time to continue to make NI contributions as I thought it would future proof me against denial of maximum benefit. If I had been made aware that I should cancel my exemption certifcate then I would not be in the current situation of appealing against the current decision now

    • It really is a confusing set of rules and it’s a shame that they are not more widely publicised. Thank you for your comment and hope you get a good outcome from your appeal.

  2. Really sorry to hear about your experience Elizabeth and I hope you are successful with your appeal. To me, it’s not logical that you can hold an exception [to pay NI] certificate while also paying NI – surely it should be an either/or? The vital small print about a exception certificate overriding any voluntary class 2 contributions is only obliquely referred to on the DWP website (as referenced in the original article) and it seems that none of the Job Centre/DWP staff you spoke to understood this. I hope that this article, and your comment, prevents other Mums having the difficulties you have experienced.

  3. Hi Helen, thanks for the useful article. I am now 20 weeks pregnant, a full-time student and also work self-employed as a nanny through an agency. However, the work I get is few and far between – in my test-period so far I have actually only worked for 12 weeks despite being registered as self-employed for all 66 weeks. I have just cancelled my Small Earnings Exemption Certificate and am starting to pay Class 2 NIC’s – I assumed this would mean I would be entitled to the higher rate of MA. However, because I haven’t worked for 26 weeks (despite being registered) I have just been told that I won’t be entitled to anything, even though I will have paid NIC’s for more than 13 weeks. Does this sound right to you?

  4. Hi Hannah, you’re welcome! Happy to help 🙂 Although I’m afraid I’m not really an expert in this area, so I wouldn’t want to give you any advice on such a complicated subject. I do know a few people who would be able to help and I’ll see if I can grab one to answer your question for you.

  5. Hi Hannah, the relevant text in the DWP website states “You must have been employed and/or self-employed for at least 26 weeks in your 66 week test period. The 26 weeks do not have to be in a row and it does not matter how much you earn.”

    As such, it doesn’t matter how little a self-employed person has worked/earned, they are still eligible for maternity allowance if they are ‘registered’.

    However, are you sure you are classified as self-employed? If you are not classified as self-employed but instead are classified as an ‘agency worker’ then the advice you have been given may stand – if your employer doesn’t pay SMP you could be eligible for Maternity Allowance, but you would need to meet the 26 weeks ‘working’ in the 66 weeks test period clause. I expect that is where the confusion lies – the person who advised you thinks you are classified as a ‘agency worker’.

    The fact you are paying Class 2 NI contributions would suggest you are indeed self-employed (and eligible for the maximum rate of Maternity Allowance) but this would need confirming. This website below is meant to help you determine your employment status http://www.hmrc.gov.uk/calcs/esi.htm

  6. Hi Frances, many thanks for your useful comments. Yes, I am definitely registered as self-employed – I also have a (very) small cake making business and do some mystery shopping – all of which counts as being self-employed. So I think, that as long as I have paid my Class 2 NIC’s for 13 weeks in my test period (which I will have done) then I should be eligible for the higher rate. Many thanks for your help.

  7. Great, if that’s the case then you should be eligible for the higher rate of maternity allowance. Just double-check that your certificate is properly cancelled – as can be seen from Elizabeth’s comment above, if you hold a certificate and pay Class 2 as well, the certificate will ‘override’ the Class 2 contributions and you will only be eligible for the basic rate of maternity allowance. I suggest you visit your Job Centre to confirm all this info ahead of claiming as you won’t want any surprises once the baby is born! Good luck x

  8. paula says:

    Hi Helen thanks for the useful information which i was exactly looking for,I am currently self employed but don’t earn much i had a small earnigns certificate and sent in request in writing to cancel my certificate as soon as i found out i was pregnant,still waiting the decision its been 2 months now,iMy quiestion is will my earnings will affect how much MA i will get?i earn about £10-£15 a week sometimes nothing.because it makes me feel that i m doing something i don’t want to give up self employment completely.Thank you

  9. Hi Paula

    Congratulations on your pregnancy!

    If you are self-employed, it doesn’t matter how much you earn – you’ll either get the maximum rate of MA if you are paying class 2’s (and don’t hold a small earnings certificate) or you will get the minimum rate of MA if you hold a small earnings certificate.

    So you need to chase up to confirm your certificate has been cancelled a.s.a.p. as you need 13 clear weeks of paying class 2 contributions (I assume you are now paying these) WITHOUT holding a certificate to qualify for that top rate of MA. If you have a copy of the letter/form you filled to cancel your certificate that will help in the event they claim they have not received your cancel request. So act now!

    Good luck!

    • Paula, glad we were able to help! Frances – thank you very much, you replied even before I had chance to ask you if you’d like to. 🙂

  10. paula says:

    Hello again thank you for your quick replies,i heard that to get the max MA you ll need to be earning £30 a week or something ,so thats not the case then.

  11. No, that’s not the case for the self-employed (some employed people receive MA because they do not qualify for SMP from their employer – have not been working there long enough etc – and they do need to be earning at least £30 per week to be eligible for the minimum rate of MA). But there is no earnings requirement for the self-employed.

    The information on the DWP website is very poorly presented, which is why there is so much confusion. For the avoidance of doubt, here is the reference and a copy and paste of the relevant text (the key words are ‘treated as earning’ – it doesn’t matter what you actually earn)

    http://www.dwp.gov.uk/publications/specialist-guides/technical-guidance/ni17a-a-guide-to-maternity/maternity-allowance-ma/#maelig

    “If you are self-employed and do not have a small earnings exception certificate, for any week covered by a Class 2 NI contribution you will be treated as having enough earnings to result in the standard rate of MA, payable at the end of the week covered by a Class 2 NI contribution. This means that from 11 April 2011 you will be treated as earning £143.03 [per week]

    If you are self-employed and hold a small earnings exception certificate, you will be treated as having earnings equal to the MA threshold at the end of any week covered by your certificate. This means you are treated as earning £30 a week. This applies even if you pay a class 2 NI contribution for a week which is also covered by the certificate”

    Hope this clears it up!

  12. Hi Frances, Just wanted to say a Massive THANK YOU for this web page. I recently filled out a MA claim form and was wondering why they hadn’t asked for proof of earnings on it. I’ve been paying my Class 2 NI since being Self employed 2 years ago but have earned very little during this time and so was worried I would not get anything at all. This has made everything so much clearer for me and I’m so glad I made the right decision on that 1st phone call when registering myself as self employed! Thank you, Thank you, Thank you xxx I’ll be tring to advocate this to others in the future. Can be so stressful for mums to be bless.

    • That’s great news and thank you so much for letting us (and others!) know. Your feedback really does mean a lot 🙂

  13. Aw, thanks Eve! And well done for making the right decision when you first registered – you’ll enjoy your maternity leave with approx. £3,800 more than you would have had you held a small earnings certificate.

    Just to reiterate for others reading this, it doesn’t matter if you don’t earn a penny from your self-employment, as long as you are paying class 2 contributions, you will get the maximum rate of maternity allowance. This is a bit of a personal crusade for myself and Helen, so thank you for spreading the word!

    Good luck with the baby x

  14. Hannah says:

    Hi Frances and Helen,

    I have cancelled my small earnings exemptions certificate and asked to start paying my class 2 NICS. I will be paying contributions for 18 weeks in my test period. However, due to a change in collection dates, the payments won’t be taken from my bank until after my due date (with the exception of a few pounds which will be collected in August). So I am concerned that when I go to apply for MA they will view me as not having paid 13 weeks worth of contributions as the money hasn’t yet been taken from my account – does this make sense? No-one at HMRC can answer my query – do you have any knowledge in this area? Many thanks again, Hannah

  15. Hi Hannah

    With such a technical query I’m afraid you’re going to have to go back to HMRC to get a definitive answer but I don’t think you would be penalised because they have made a one-off change to their direct debit collection dates. I would think the fact you are registered as paying Class 2’s for 13 weeks in your test period would be sufficient – don’t forget some people chose to pay their Class 2 contributions by direct debit 6-monthly (in arrears) so this issue must come up all the time for any of those women who become pregnant.

    If you haven’t already, see this link here http://www.hmrc.gov.uk/payinghmrc/class2nics.htm#13 which explains the payment process. It seems to suggest that you can pay your Class 2 arrears at any time by CHAPS transfer, so it might be an option to wait until you have ‘accumulated’ 13 weeks of Class 2’s owing, and then make a bank transfer for this full amount, and hopefully that would put you in the clear, well before the birth of your baby. I hope this helps, but keep persevering with HMRC until you get your definitive answer, and let us know how you get on!

  16. Hi Helen
    I would like to know a bit more about the MA – if you are running an online business and take MA – do you have to stop the business totally for 39 weeks or can someone else run it for you? (either a partner or an employee…?) As far as I understand if one is accepting MA then all work has to stop except for the 10 days of keeping in touch days allowance. Please advise….
    Thanking you in anticipation…

  17. Hi Amy,
    I’m pretty sure this article will answer your question? http://businessplusbaby.com/2010/12/13/self-employment-during-your-maternity-pay-period/

  18. Hi just wanted to ask something as i am really confused now and don’t know what to do,my husband made redundant and next week he is going to job centre to apply for a job seekers allowance ,Myself i am self employed and pregnant paying my NI2 and hoping to get max MA,obvousy because we are famiy he will include me in his application,My question is does my MA will be affected if my husband on job seekers allowance? my position is i work around 15-16 hours a week but earn a very little sometimes nothing
    Please advice in this
    Thank you in advance

    • Hi there, I’m afraid neither Frances or I know the answer to this one, perhaps you could call in at your local Jobcentre Plus and ask ask them? They will be administering both the JSA and the MA so would be in the best position to advise.

  19. Angela Houston says:

    Hello,

    I wondered if you could help me. I am 22 weeks pregnant and am self employed. I have worked for 26 weeks in my test period, however i have held a small earnings exemption certificate in this time. I called to cancel this and backdate it to April to make sure that i have plenty of time to cover the 13 weeks, I am due in December ’11 and have been told to put my intentions ot cancel my exemption in in writing. When i look at the MA application it askes if i have paid 13 weeks contributions which i will have when i apply, but will also have held an exemption for 13 weeks within the test period so i would have to tick both boxes. Will i be entitled to higher or lower rate MA? Regards Angela

  20. Hi Angela
    You will need to tick both boxes on the form, but you should get the maximum rate if you have 13 clear weeks of class 2 contributions within your test period. By clear, it means paying a contribution without also holding a exception certificate for that week (the certificate overrides the contribution for any given week).

    According to Elizabeth’s experience (first comment above) the cancellation of a exception certificate can not be backdated. By my maths there is currently approx. 16 weeks before your due date (assuming its at the start of Dec – more if you are due later in the month). You therefore have only 3+ weeks to get your certificate cancelled. I would be concerned that if you send a letter asking for the cancellation to be backdated, it will cause a delay (as the NI insurance office try to figure out whether it is permitted or not) thus eating into the 3 weeks buffer you currently have. I would instead write to cancel with immediate effect. Keep a copy of your letter and consider sending it recorded delivery.

    There is an interesting discussion on this topic at http://www.mumsnet.com/Talk/pregnancy/1144746-PSA-Maternity-Allowance-and-small-earnings-exceptions/AllOnOnePage where, again, the poster wasn’t allowed to backdate cancellation of her certificate. She eventually got her full allowance through a loophole of backdating her self-employment start date. This all goes to show how confusing and arbitrary the rules are. Please, anyone who is reading this, the message is: do not go anywhere near a small earnings exception if you think you might get pregnant in the future. I’m sure Angela would agree, it’s not worth the stress of trying to cancel it.

    • Frances, thanks once again for your help. Even after all this time I’m still amazed and disgusted by how confusing the rules are and by how many mums must be caught out by them at a time when they really need that money. It’s brilliant to have you around to help out, so thanks again 🙂

  21. Thanks for this, I’ve gone from thinking I’d get nothing as I didn’t earn £30 a week, to thinking I could get £27, to realising I might get the full amount! I only started googling because the wording in the book they gave me at the scan was different to what I’d read on the official website.

    I’m nearly 20 weeks, and sent my cancellation back today by recorded delivery. Can anyone tell me how long it might take to process, when they ask for payments, and what proof you need that you have paid the 13 weeks contributions? I think I have just realised in time?

    All official helplines are clueless, they couldn’t even tell me if I was eligible for anything!

  22. Hi there, I hope you have just enough time to get this sorted, but I would recommend chasing up the NI self-employed helpline until you get confirmation that your certificate is cancelled. I don’t know the official time scales (I think it depends on how busy they are) but I do recall it took quite a while (months) after sending in my direct debit form for the Class 2 contributions to start coming out of my account (but they were then backdated). See my advice to Hannah above regarding the possibility of paying all your NI contributions in one lump sum by CHAPS, once you have accumulated 13 weeks owing. I think you are going to have to be very persistent (i.e. a total pain!) on the helplines to make sure you get your questions answered and your case progressed. With regards to the proof of NI contributions, my understanding is that the people processing your Maternity Allowance claim form will simply run a check with the HMRC (via your NI number) to confirm you have 13 weeks’ clear contributions.

  23. Thanks, I’ve sent recorded so i’ll know when they have it, I’ll start chasing them fairly soon to make sure it’s done. Thank goodness the receptionist gave me that baby money book or I’d still be in the dark!

  24. Hi Helen

    I became self employed in Feb 2011 and I foolishly claimed nat ins exemption cert :/

    I’m now 9 weeks pregnant and have established I need to cancel my cert as of NOW! I’m hoping they are going to process it in time and let me make my 13 weeks payments before 20th March 2012 when I’m due but I’m not sure what happens when they make you pay 3 months in arrears now if I’ll get it all processed and start paying in time?

    do they not cancel it from the date you sign the cancellation on and ask for payments from that date?

  25. You should have plenty of time to get this sorted – cancel your certificate now and ask to start paying NI contributions monthly with immediate effect.

    This link below shows the direct debit collection dates for monthly collections http://www.hmrc.gov.uk/payinghmrc/class2nics.htm#13
    By cancelling now, you will pay approx. 7 months worth of contributions before your baby is due (and you only need 3 months (13 weeks) to get the full rate of MA). You do start paying from the month you sign the cancellation but sometimes it takes a couple of months for the direct debit to be processed with your bank, so any payments owed are backdated.

    There was a one-off 3-month delay to the monthly direct debit collections in April this year (payments suspended until August, and then will be backdated) but that won’t affect you as you are only starting to pay now – is that what you were thinking about when you mentioned the 3 months in arrears?

  26. Hi Frances,

    yes it was what I was worrying about that they’d delay several months too and I’d loose months to pay in as I know my Husband is a self employed carpenter and they’re only taking his April payments now, sooooo glad I found this link as I had no idea at all about it and how much you could loose out on, I wasn’t trying for a baby when I became self employed so it didn’t occur to me I could loose out, it’s all signed now for posting monday, I’ll give them a call monday to ask about setting up my direct debit for straight away, so when it’s backdated does that mean I pay a larger ammount the 1st payment to catch up on the time between my cancellation and them processing my direct debit?

  27. Yes, that’s correct. I’ve just checked and my first direct debit payment was about 3 months after I registered as self-employed and was for £31.20, so you might see a similar delay, and then a large first payment, when you cancel your certificate.

    All the best for the pregnancy!

  28. Hi,i just wanted to know when i can start my maternity leave and apply for MA, can i apply earlier? if i due to start maternity leave on the 20th sept can i send in the form before i actualy start my maternity leave?it says 11weeks before baby id due but ona ma form says 14 weeks before bbaby is due,confused .I am self employed so i think maybe i don’t qualify for MA if i start my Maternity leave nearly 3 months before my baby id due
    My baby id due on 02/12/2011 and i am around 27-28 weeks pregnant.is it too early to apply ma and stop working?Thank you ?)

    • I’m afraid we don’t know the answer to this one – can we suggest you contact Job Centre Plus on 0800 055 66 88 ?

  29. Hi Frances/Helen,
    I just wanted to check something. I run a small business in which I make and sell babywear. We’re thinking of having another little one. If I do fall pregnant, I will be able to claim MA as I pay NIC Class 2 and have done for months. It states that you can work a maximum of 10 days during your maternity and still get paid but how does this work out for small businesses? Ideally I’d like to have plenty of stock made up in advance and then during the 6-9 months I take off work, if I get any orders from my website (which I envisage minimal), I’d like to send them out. Does my 1/2 hour spent packaging up a parcel count as 1 day or can the hours be cumulative. It wasn’t clear cut. I really don’t want to shut down the site for the duration but it won’t earn me as much as MA. I mostly sell at baby fayres etc at the moment but unless there was a big show (counted as 1 day’s work each) then I wouldn’t actively be seeking trade. Any advice? This will have a big impact of what I decide to do and how I can accurately report sales on my books. Thank you 🙂

  30. Frances and I have decided to close the comments on this post. We’ve covered pretty much everything we know about maternity allowance and the SEEC in this post and the comments so we don’t have anything else to add! If you have any other questions we recommend you contact Job Centre Plus on 0800 055 66 88.

    Thanks for all your comments and we hope you are able to claim all the money you’re entitled to.

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