We are commonly asked by our clients what income they will receive when they go on maternity leave from their practice. The answer differs greatly depending on whether the dentist is providing NHS or private dental services.
We’ve asked Matthew Norton, Senior Client Manager to explain the different sources of income you may have when on maternity leave.
Over to Matt
As hinted to above, we are regularly answering questions from our clients about what their income will look like when they go on maternity leave. Below I’ve explained who qualifies for NHS maternity pay, as well as outlining what you will receive and how to apply, and what payments you’re entitled to as a private dentist.
NHS maternity pay – who qualifies
Dentists that are earning income from NHS dental services may be entitled to maternity leave payments from the NHS. The qualifying conditions are:
- The dentist is named on an NHS dental performer list for 2 years with 26 weeks continuous employment before the week they are due to give birth, this period must precede the 15th week before they are due to give birth.
- Become pregnant and reached 11th week before the week they are due to give birth.
- Stopped performing dental services on the contract.
- Not registered as a limited company or being paid for their NHS dental work into a limited company.
The year spent as a foundation dentist will count towards the 2 years of being named on the NHS dental performer list.
We are regularly asked whether you need to be a member of the NHS pension scheme to be eligible for maternity payments. The answer is: No! This is a common misconception but as you can see from the qualifying conditions, there is no criteria to be a member of the NHS pension scheme.
If you satisfy the above criteria, you will be eligible for maternity leave payments.
NHS maternity pay – what will I receive?
If you do qualify, you will then be wondering what you are entitled to received.
Your maternity pay will be based on the current year estimated Net Pensionable Earnings (NPE) or Net Pensionable Earnings Equivalent (NPEE) on Compass. Estimated NPE or NPEE is the estimate of the NHS pay you will receive for the financial year at that practice, with the financial year ending on 31st March.
Before making the application for your maternity pay, you will need to ensure that this estimate is a fair and accurate estimate of your expected NHS pay for the year.
To do this, you will need to login to Compass and find what this estimate is.
This can be found by going to Performer > Performer Contract Search and clicking on View next to your active contracts. This will bring up your NPE or NPEE for the years you have worked on the contract. Find the current year and this will tell you what your NPE/NPEE is for the year.
We regularly find that the estimate NPE/NPEE is not an accurate reflection of the dentists NHS pay for the current year. If the estimate is too low, then your maternity pay will be lower than you are currently earning for your NHS work and this should be amended.
To get your NPE/NPEE amended, the practice can change this on Compass and submit a Compass Authorisation Form to the NHS.
Maternity leave payments are paid for 26 weeks starting from the point you stop working at the practice and commence your maternity leave.
For someone with an estimated NPE of £52,000 for the year, they will be entitled to £26,000 for their maternity leave period.
The maternity pay is paid to the practice with their NHS contractual pay and this will need to be paid to the dentist on maternity leave.
There are some things to be aware about with your maternity payments:
- The maternity pay will be based on the number of weeks of maternity leave in that pay period and so your maternity payments may change month to month.
- The NHS deduct the value of statutory maternity allowance (SMA) you are entitled to from the maternity pay you are entitled to.
NHS maternity pay – is it taxable and pensionable?
NHS maternity pay is taxable and if you are a member of the NHS pension scheme, pension contributions will be deducted from your maternity pay.
NHS maternity pay – how do I apply and when do I apply?
You apply for your maternity pay using form SFE(PL) that is available on the NHSBSA website.
Applications must be received no earlier than 1 month before the payment start date, and no later than 3 months after the payment start date.
On the SFE(PL) form, you will need to state your parental leave period, your estimated monthly NPE/NPEE for the current year, per Compass. We have detailed the process of finding your annual NPE/NPEE above and once this is correct, your monthly value can be worked out. If your estimated NPE/NPEE was already correct and has not been amended during the year, the monthly NPE/NPEE can be found on Compass on your latest monthly statement.
You must submit a maternity certificate with the SFE(PL) form.
As self-employed individuals, you are also entitled to claim SMA (more on this below) and the NHS will assume you are receiving this benefit. If you are not entitled to SMA, you must provide evidence with the SFE(PL) form otherwise the NHS will deduct the SMA entitlement from your maternity pay.
Statutory Maternity Allowance
SMA is a government benefit payable to taxpayers who are not entitled to Statutory Maternity Pay. This is typically paid to self-employed individuals.
SMA is payable for up to 39 weeks and you can make a claim as soon as you have been pregnant for 26 weeks. Payments can start up to 11 weeks before your baby is due.
For the 2023-24 tax year, SMA is £172.48 a week as long as you have been registered with HMRC for at least 26 weeks as self-employed in the 66 weeks before the baby is due and paid class 2 NIC for at least 13 weeks of the 66 weeks before the baby is due.
As class 2 NIC is only payable once a year with your January self-assessment tax payment and this is made in arrears, HMRC may request a further payment of class 2 NIC to ensure you receive the full SMA entitlement. If you do need to pay some class 2 NIC, this will then be deducted from a future class 2 NIC payment.
Over the 39 week period, you will therefore receive £2,069.76 if you are entitled to the full SMA.
What other payments am I entitled to if I am a private dentist?
Unfortunately, there aren’t too many options for you as a private dentist.
You can make a claim for child benefit payments, but if you or your spouse earns more than £50,000 in a tax year, some or all of the child benefit will need to be paid back when completing your Tax Return for that year. Child benefit is currently £24 a week for the eldest or only child and then £15.90 per additional children.
If you are a fully private dentist, then you will need to fund your maternity leave by saving from your previous earnings. Financial planning must be undertaken to ensure you have the funds available to support you and your family during your maternity leave.
For private dentists, we have seen a rise in incorporations in the years prior to starting a family to help with financial planning.
How will incorporation help you with planning financially for maternity leave
We have written previously about incorporation here and here.
When trading through a limited company, company profits are subject to corporation tax. As the shareholder of the limited company, you can pay yourself dividends from the post corporation tax profits.
In the period leading up to your maternity leave, you can opt to reduce the dividends you are taking from the company and save money within the company to act as a pot of money to draw down on while on maternity leave.
The benefits of this are:
- Reducing your income tax liabilities in the tax year(s) leading up to your maternity pay as your personal income will be lower.
- You may restrict your income each tax year to below the basic rate threshold of £50,270 meaning you aren’t paying income tax at the higher rates of tax. You are therefore deferring the income tax on the available reserves in the company until you draw them down when on maternity leave.
- You draw down the cash available in the company while on maternity leave and with some remuneration planning from us, a dividend tax rate of 8.75% could be payable on your dividends taken in the year. This is in contrast to taking all of these dividends when earned and potentially paying income tax on the dividends at 33.75% or higher.
Trading through a limited company can also enable you to plan your personal income to be able to retain your child benefit entitlement and ensure you are eligible for tax-free childcare.
Here to help
Our dedicated dental specialist team is here to help you with any questions you have regarding maternity pay, maternity leave and any other financial or tax questions you have. To speak to our team on how we can assist, give us a call on 0151 348 8400
