Practical tips to survive a salary drop on Statutory Maternity Pay
As someone who has navigated the financial challenges of Statutory Maternity Pay (SMP) package, I understand first-hand the difficulties that come with a dramatic drop in earnings.
During my time working in a GP practice, I was only entitled to SMP, which meant no enhanced maternity package and a significant decrease in income. Despite the challenges, I found many ways to help us manage our finances during this period.
Here’s what worked for us and how you can use these tips to ease the financial strain of maternity leave.
1. Take advantage of Marriage Allowance
One of the first things we did to ease our financial burden was to apply for Marriage Allowance. Because my earnings dropped below the tax-free threshold during maternity leave, I was eligible to transfer a portion of my tax-free allowance to my husband.
This can reduce your tax bill by up to £252 per tax year (from April 6th to April 5th of the following year). We took advantage of this and even received a backdated claim lump sum from HMRC. To check your eligibility and apply, visit the HMRC Marriage Allowance page.
Claim Child Benefit immediately!
Claiming Child Benefit as soon as your baby is born is crucial. You can only backdate this claim up to three months, so it’s important to apply right away to avoid losing out on any potential payments.
As of now (August 2024), you can receive £25.60 per week for your eldest child and £16.95 for each subsequent child. However, be aware of the High Income Child Benefit Charge if one parent’s earnings exceed £60,000 annually. This charge gradually taxes you on the Child Benefit until your earnings reach £80,000 and will completely negate it if earnings reach this point.
Despite this, claiming Child Benefit can still be beneficial as it counts towards your National Insurance contributions, meaning even if you dont benefit financially now, you may benefit later on in life when you claim your state pension. For more details, check out the Child Benefit page.
3. Explore self-employment opportunities
If you’re on SMP, you can still work as a self-employed individual, though this doesn’t apply if you’re claiming Maternity Allowance. I took advantage of this by working around my husband’s working hours and became a part-time, self-employed delivery driver for Hermes on weekends. This additional income provided a valuable boost of a few hundred extra pounds to our monthly earnings without affecting my SMP.
4. Spread out your Council Tax payments
Another effective money-saving tip we tried was to spread our Council Tax payments over 12 months instead of the usual 10. This adjustment allowed us to manage our budget more smoothly throughout the year, rather than dealing with two months of higher payments.
5. Stick to a strict budget
Creating and sticking to a strict budget was essential for us. We included all necessary expenses while also accounting for occasional treats like takeaways. By being disciplined with our spending, we were able to manage our finances effectively.
For more tips on creating a budget, check out my article on How to Budget or explore tools like Snoop to keep track of your spending.
6. Use your Keep In Touch (KIT) days
Finally, I made the most of my Keep In Touch (KIT) days. Although not mandatory, KIT days allow you to work up to 10 days during your maternity leave to stay connected with your employer and the business. I split my KIT days across my 12 months maternity leave, which provided a helpful little income boost throughout the year.
Summary
By knowing what resources were available to me and making the most of them, we were able to navigate the financial challenges of maternity leave more smoothly. I hope these tips help you manage your finances during this special yet financially challenging time for you and your family. Let me know in the comments if you found this helpful, or if you have any more tips to share!
Disclosure: Some of the links in this blog are affiliate links. This means we may earn a commission if you click through and make a purchase, at no additional cost to you.
You might also like
Here is everything you need to know about our trip to Lapland - and was it worth it?