Small Businesses: Applying to HMRC for an advance of Maternity Pay and Paternity Pay

Small businesses often have to make payments to employees to cover statutory maternity and paternity pay. If you cannot afford to make such payments, you can ask HMRC to provide an advance payment of up to 103%  of your employee’s statutory maternity, paternity, adoption, and shared parental pay to help your cash flow.

HMRC offers financial help to small businesses to assist with their cash flow when they have to make statutory payments to employees (including directors).

As an employer (in 2024) you can usually claim 92% of employees' Statutory pay. This includes for Statutory Maternity, Statutory Paternity, Statutory Adoption, Statutory Parental Bereavement and Statutory Shared Parental Pay. You can reclaim 103% if your business qualifies for Small Employers’ Relief. For more information on this you can visit the HMRC website.

The cost of your company’s statutory payments (excluding sick pay) are usually offset against your company PAYE liabilities. However, if the total of your PAYE deductions for items such as Income Tax, National Insurance Contributions, student loans etc. is less than cost of the statutory payments you need to make, you can apply for advance funding from HMRC.

You can check out our Maternity Pay and Paternity Pay articles for more specific information on each type.

How to apply for an advance payment

You can apply online to be paid in advance for:

• Statutory Maternity Pay (SMP)
• Statutory Paternity Pay
• Statutory Adoption Pay
• Statutory Shared Parental Pay (ShPP).

If you’re a Crunch client, then for a small fee we can take care of all of this for you and apply on your company’s behalf.

Before applications can be made, you’ll need to provide us with a copy of your MATB1 form (a scanned copy will also do). This can be obtained from your GP, Doctor or Midwife on/after the 20-week scan of the baby. You’ll also need to confirm the date you wish to start your maternity leave.

An application for advance payment should be made no more than four weeks before the first statutory payment is due to an employee. If you apply earlier than that, HMRC may return your application.

You can be charged a penalty (up to £3,000 per employee for each tax year) if you include incorrect information in your application.

You need to use your payroll software to send an Employer Payment Summary (EPS) as well as a Full Payment Submission (FPS) if you reclaim statutory maternity, paternity, adoption or shared parental payments – even if you received an advance payment from HMRC to cover them.

What are my employees entitled to?

By law, your company employees (including directors) are entitled to the following.

Statutory Maternity Leave

Eligible employees can take up to 52 weeks’ maternity leave. The first 26 weeks is known as ‘Ordinary Maternity Leave’, the last 26 weeks as ‘Additional Maternity Leave’. The earliest date that leave can be taken is 11 weeks before the expected week of childbirth, unless the baby is born early.

Employees must take at least two weeks leave after the birth (or four weeks if they’re a factory worker).

Statutory Maternity Pay (SMP)

SMP for eligible employees can be paid for up to 39 weeks, usually as follows:

• the first six weeks: 90% of their average weekly earnings (AWE) before tax
• the remaining 33 weeks: £183.03 (for the 2024/25 tax year), or 90% of their AWE (whichever is lower).

Income Tax and National Insurance Contributions still need to be deducted.

If you’re a small employer and your business qualifies for Small Employer’s Relief you can usually claim 103% of employees’ Statutory Maternity (SMP), Paternity, Adoption and Shared Parental Pay.  If your business paid more than £45,000 in Class 1 National Insurance (employee and employers) then you won’t qualify and you will then usually be able to reclaim 92% of the payments.

Statutory Paternity Leave and Statutory Paternity Pay

Employees may be eligible for Statutory Paternity Leave and Pay if they and their partner are:

• having a baby
• adopting a child
• having a baby through a surrogacy arrangement.

Statutory Paternity Leave

Employees can choose to take either one week or two consecutive weeks’ leave. The amount of time is the same even if they have more than one child (for example twins).

Leave can’t start before the birth. The start date must be one of the following:

• the actual date of birth or date of placement for adoption
• an agreed number of days after the birth or placement for adoption
• an agreed number of days after the expected week of childbirth.

Leave must finish within 56 days of the birth (or due date if the baby is early).

If you are adopting, your period of Paternity Leave can start:

• on the date of placement
• an agreed number of days after the date of placement
• on the date the child arrives in the UK or an agreed number of days after this (overseas adoptions only)
• the day the child was born or the day after if you’re working that day (surrogate parents)

Leave must be taken within 56 days of the date of placement or the child’s arrival in the UK (overseas adoptions).

Statutory Paternity Pay

Statutory Paternity Pay for eligible employees is  £184.03 for the 2024/25 tax year, or 90% of their AWE (whichever is lower). Tax and National Insurance needs to be deducted. Some employment types, like agency workers, directors and educational workers, have different rules for entitlement.

Before applications can be made, you’ll need to complete the online SC3 form. Print it, sign it and return it to Crunch (a copy or scan is perfect).

You must make sure your paternity leave and pay policies are clear and easily accessible to staff.

If you’re a small employer and your business qualifies for Small Employer’s Relief you can usually claim 103% of employees’ Statutory Maternity (SMP), Paternity, Adoption and Shared Parental Pay.  If your business paid more than £45,000 in Class 1 National Insurance (employee and employers) then you won’t qualify and you will then usually be able to reclaim 92% of the payments.

If your employee is looking to use Shared Parental Leave (and Shared Parental Pay), check out this HMRC article which explains how it works.

Other Statutory Payments Crunch can help with

There are other Statutory payments available to employees such as Statutory Adoption Pay, Shared Parental Pay and Additional Statutory Paternity Pay that we can also help with. If you’re already a Crunch client, then for more information regarding these benefits and whether you could get them, please contact your client manager at support@crunch.co.uk  and we can submit the application on your behalf.

If you’re not a Crunch client, we’d be happy to talk to you about how Crunch could help your business or you can get further information on the benefits and how to apply for them from the Gov.uk website.