Tax on SMP

It depends how much you earn but if you've already hit the tax threshold for this year, you will be taxed on your SMP as it doesn't reset until April. In terms of how much, it will be which ever percentage you currently pay but less as it's based on your SMP, not your usual earnings.

Seems so utterly unfair if we are taxed on SMP which is not enough to live on as it is- I’d not even considered this that they would look at overall financial year earnings and still tax during the months we’re on considerably less 🥲

Right okay thank you, that just seems like an awful lot to be taxed! So for example if your SMP is £736 you’ll still be taxed £150 (20%) so you’ll actually on receive £600?

Tax is worked out across the whole tax year - so it'll be depending on what you earned before mat pay. NI is looked at monthly so that just is what it is. If you were on a high salary pre mat pay then you probably will pay minimal tax as you've already paid a large chunk. If you can work out how much you will have been paid gross up to mat pay kicking in, then add on however many weeks of maternity pay gross, take off your 12750 personal allowance and take off how much tax you will have paid at that date, you'll see how much tax will be due at the end of the tax year. As tax is applied from an intuitive position based on your tax code, it's assumed whatever pay you have in one month will continue for the 12 months of the tax year. So you will probably have paid more than enough and may even get a small rebate with your maternity pay. Obviously things like KIT days and annual leave will affect this though :)

Ahh it’s all so confusing 😂 so do you get your tax free amount per month? Because if so, by October you would only have received around £7000 tax free for the year no matter what you earn? So then surely you wouldn’t owe any tax on SMP? Thank you for your help it’s just so confusing 😂🥲

You kind of do get your amount per month, payroll software is all very clever now and is very good at pro-rata -ing tax and salaries. The only way to really tell is to gross everything up (if you're on a set salary every month this is way easier), add on the maternity pay and take off personal allowance & tax paid. Rough calc in next comment: 1/2

Say 2000 gross per month x 12 = 24000, less personal allowance = taxable pay of 11,250 Therefore tax payable to date should be something like 11,250x20% = 2,250 ÷ 12 x months paid So say this was 6 months of normal pay before your maternity pay kicks in, tax paid would be 50% of 2250 = 1125 Very very simplified here tho But you'd only actually owe: Salary of 2,000 x 6 = 12,000 Maternity pay of (184.03 x 52)/12 ×6 = 4,785 So total gross income is 16,785, less personal allowance is 4,035 Meaning tax due in year is 807 But you've already paid 1125 on your salary as above so you're due a refund of 318 These numbers are very round and I've ignored pension etc and the 90% for the first 6 weeks as it'll skew things slightly. But this is a basic working :) 2/2

As others have said, you essentially get about £1k tax free a month. Everything above this you pay income tax on, in the same way you would with income

@Katie I feel like that doesn’t make sense for SMP though because that isn’t above £1k per month so in theory you should pay no tax?

@Charlotte thank you!! I’m going to try this to figure it out!

@Rebecca no I don't think you technically should as long as your tax free allowance is spread over the year and you don't have anything funny going on with your tax arrangements. You will pay tax if you get any maternity pay from work on top that takes you over the threshold, though

If you are over the tax free earnings for the year you will pay the relevant tax for what you then earn over. However if you are under that limit you won't pay tax.