What Happens to My Tax and NI When I Go on Maternity Leave

Going on maternity leave brings big changes to your work and income which naturally leads to questions about tax and National Insurance. Many people feel unsure about how Statutory Maternity Pay is taxed, whether NI continues, how their pension is affected and whether their tax code changes. In my opinion this is one of the most misunderstood areas of payroll because maternity pay looks different on payslips and the amounts often vary each month.

This guide explains exactly what happens to your tax and National Insurance when you go on maternity leave so you know what to expect. You will learn how Statutory Maternity Pay works, how tax and NI are calculated, what happens if your income drops, how your tax code is affected, how the leave impacts your pension and when refunds or corrections might occur. I will also walk through clear examples because that makes everything easier to understand.

By the end you will know exactly what happens to your tax and NI from the moment your maternity leave begins.

Understanding How Maternity Pay Works

Most employees receive Statutory Maternity Pay (SMP) if they meet certain conditions. SMP is paid for up to 39 weeks and is made up of two parts:

First 6 weeks: 90 percent of your average weekly earnings
Next 33 weeks: a fixed weekly rate set by the government or 90 percent of your average weekly earnings if this is lower

Some employers offer enhanced maternity pay on top of SMP but the tax and NI treatment is the same. SMP is treated as normal pay for tax purposes.

In my opinion many people assume SMP is tax free because it feels like a benefit although it is actually taxed exactly the same way as wages.

What Happens to Your Income Tax on Maternity Leave

Tax is still deducted from maternity pay. SMP is taxable income so your employer must calculate PAYE based on the amount you receive.

Your tax code stays the same

Your tax code does not automatically change when you go on maternity leave. You continue using the same tax code unless HMRC issues an updated one for unrelated reasons.

You still receive your full personal allowance

Your personal allowance does not reduce because you are on maternity leave. In fact receiving lower income during leave often means:

You use less of your personal allowance
You pay less tax
You may receive a tax refund later if too much tax was deducted early in the year

In my experience many people receive tax refunds after returning to work because their annual income ends up lower than the PAYE system predicted.

Your tax deductions may appear lower

Because SMP is usually lower than your normal wage your PAYE deductions may reduce significantly. Your payslips may look unusual although the process is correct.

Emergency tax is not applied

SMP does not trigger emergency tax. Your employer continues using your normal tax code.

What if you receive enhanced maternity pay

Enhanced maternity pay is also taxable. If your employer tops up your SMP to a higher amount your tax may look similar to your normal payslips although total tax for the year may still be lower.

What Happens to National Insurance on Maternity Leave

This is where things change.

Unlike Income Tax, National Insurance is not charged on all SMP. NI is only deducted in the first 6 weeks if your maternity pay is high enough.

NI is deducted if your maternity pay is above the NI threshold

National Insurance is deducted only if your maternity pay exceeds the weekly primary threshold. In most cases:

During the first 6 weeks (90 percent pay)
Your earnings may still be high enough to pay NI

During the remaining 33 weeks
SMP is usually below the threshold so no NI is payable

You still build NI credits even when NI is not deducted

This is a relief for many parents. Even when you stop paying NI because your SMP is too low you continue receiving NI credits for the entire period of maternity leave. These credits count as qualifying years toward your State Pension.

In my opinion this is one of the biggest benefits of the UK system because it protects your long term pension even when income drops.

You do not owe NI later

There is no catch up or adjustment. NI simply stops when your pay drops below the threshold and restarts when you return to work.

How Maternity Leave Affects Your Tax Code and PAYE Records

Your tax code stays the same
Your PAYE record remains active
HMRC sees maternity pay as employment income
You remain employed during maternity leave

Your employer continues to report pay to HMRC each month through payroll so your record remains up to date.

If you receive no pay for a period of maternity leave you still remain an active employee although HMRC will receive a £0 submission from your employer until pay resumes.

How Maternity Leave Impacts Your Pension

Pensions are often overlooked although maternity leave affects them.

Employer pension contributions

If you remain in your workplace pension scheme then:

Your employer must continue making pension contributions
Contributions must be based on your normal salary not your SMP
This continues until you opt out or the 39 weeks of SMP ends

This means you benefit from pension contributions even when your pay drops.

Your contributions

Your pension contributions are based on your actual maternity pay so they are usually lower during leave.

This can reduce the amount you personally pay in however employer contributions usually continue which softens the impact.

In my opinion maternity leave is one of the few times you receive pension contributions based on a higher reference salary than your actual pay which is a genuine financial advantage.

Will I Pay More Tax After Returning to Work

Possibly in the short term but not overall.

When you return:

Your income increases
PAYE adjusts based on your tax code
You may notice higher deductions compared with SMP months

However your total tax for the year usually ends up correct because PAYE updates automatically.

Some people receive tax refunds

If your income drops significantly for part of the year you may have overpaid tax earlier. HMRC may automatically refund you at the end of the tax year.

Common Scenarios During Maternity Leave and How They Affect Tax and NI

Scenario 1: You start maternity leave part way through the tax year

Your income reduces
You may enter a lower tax bracket
Tax deductions reduce
NI may stop
You may be due a refund at year end

Scenario 2: Your employer pays enhanced maternity pay

For the enhanced portion you pay full tax and NI
For the SMP portion NI may stop
Tax is deducted normally

Scenario 3: You take shared parental leave instead

Shared parental leave pay is taxed in the same way as SMP
NI applies only above thresholds
Pension rules remain similar

Scenario 4: You work KIT days while on maternity leave

You can work up to 10 Keeping in Touch (KIT) days
You are paid for these days
Pay is subject to tax and NI
It does not affect your SMP entitlement

KIT day pay may temporarily take you above the NI threshold.

Scenario 5: You end maternity leave early

Your payroll simply resumes normal pay
Tax and NI recalculates automatically
Pension contributions return to normal

Scenario 6: You take unpaid maternity leave after SMP ends

No tax is deducted
No NI is paid
You still get NI credits
Pension rules depend on your scheme

How Tax Credits and Universal Credit Are Affected

Maternity pay counts as income for Universal Credit
Unpaid maternity leave reduces income which may increase UC
Tax Credits may adjust based on yearly income

These systems are separate from PAYE so maternity leave can change benefit amounts.

How to Check Your Tax and NI During Maternity Leave

You can:

Check your payslips
Log into your HMRC personal tax account
Check your State Pension forecast
Check your National Insurance record

Your NI record will show credits for periods of maternity leave.

In my opinion it is a good idea to check your NI record a year after returning to work to confirm all credits were applied.

What If My Employer Has Made a Mistake

Mistakes can happen such as:

Incorrect maternity pay calculation
Wrong tax code
Incorrect NI deductions
Missing pension contributions

If something looks unusual:

Speak to payroll
Check your entitlement
Ask HR to recheck the calculation
Contact HMRC if tax code seems wrong

Payroll errors are usually easy to fix with a corrected payroll run.

Conclusion

When you go on maternity leave your tax and National Insurance change in predictable and logical ways. Income Tax continues as normal although often at a lower level because SMP is lower than your usual wage. National Insurance usually stops after the first six weeks because SMP falls below the threshold although NI credits protect your State Pension throughout maternity leave. Pension contributions continue in most cases and PAYE adjusts automatically once you return to work.

In my opinion maternity leave is one of the few times where the tax system actually works in your favour because reduced income often leads to lower tax and continued NI credits protect your future pension. With the right understanding you can focus on your leave without worrying about whether your tax is correct.