What are you entitled to?

It’s always important to take stock of your situation when you’re having a baby, so make sure you understand all of your entitlements as well as all of the potential costs.

 

Maternity pay

You can take up to a year off work, but you’ll only get maternity pay for nine months, and that’s providing you’ve worked for the same company for at least six months.

Some companies are more generous than others, so speak to your HR department first. As a general rule, the basic minimum is 90% of your average gross weekly earnings for the first six weeks, followed by £135.45 for the next 33 weeks. Bear in mind that you’ll pay tax and NI on your maternity pay just as you would with your regular salary. 

If you’ve worked for a company less than six months or are self-employed, you’ll need to claim Maternity Allowance. You can claim for up to 39 weeks and you can find out more at Directgov.

The rules on paternity leave have recently changed. Dads should be able to get at least two weeks' paid leave but may be entitled to up to 26 week with paternity pay of £135.45, so get your partner to find out what's on offer. If he uses his extra paternity leave, you will need to have gone back to work, so discuss between you what the best options are.

Child Benefit

Right now anyone with children gets child benefit; regardless of what you earn or where you live.  It’s £20.30 a week for your first child and £13.40 for each, and every other one; that’s over £1700 a year if you’ve got two children.   But the Government’s scrapping child benefit for higher rate taxpayers; anyone earning over £44,000 from 2013.  And this isn’t based on your household income; the cuts apply if either partner earns £44,000 or more.  Big losers in this will be stay at home Mums, dependent on their partner’s salary for the family budget, and single parents with a higher than average, but solo income, will see payments disappear too.  

My advice is to work out if you’re likely to be affected; and if so, put some of your child benefit aside right now.  Start by trying to save a third of it; then half and by the time the cuts come in you’ll have some money stashed away and be better able to cope on a reduced budget.

Child Tax Credit

The tax credit system is a complex one with no ‘one size fits all’ as payments vary according to how many children you’ve got and how much you earn.  Prior to April households with an income of under £58,000 could claim tax credits but from April changes mean it’s unlikely households with an income over £43,000 will get any payments.  And even if you are eligible for payments; the Government has also axed the ‘baby' element of Child Tax Credit, previously paid to parents with a child under one and worth £545.  Check how the changes affect you and how much you’ll get at http://www.hmrc.gov.uk/taxcredits/.

Mortgage Holidays

One short-term solution to adjusting to a reduced salary is taking a mortgage holiday. If you’ve got a good track record, some lenders will let you suspend payments for up to a year. While you’ll still have to repay those ‘unpaid’ months, this can give you some much-needed breathing space. The amount you don’t pay over your ‘holiday’ will be added to your loan, which may mean a minimal monthly increase over a fifteen or twenty year mortgage term. If you’re really struggling, speak to your lender or get help from Citizens Advice. 

Childcare vouchers

If you’re planning on going back to work after your baby’s born, childcare costs can take a big bite out of your salary - typically around £150 a week - so I’d suggest finding out if your employer is a member of the Childcare Vouchers Scheme. This Government-backed scheme means you can claim tax-free vouchers from your employer worth up to £55 a week, which you can use to pay for registered childcare such as nurseries, playgroups and childminders. If both you and your partner are employed, you can double your money if you both claim the vouchers. As of 6th April 2011, new rules mean you can only claim this amount tax-free if you are not a higher rate taxpayer; higher rate taxpayers can claim around £22 a week tax-free.