Is it better to take maternity pay at half or full pay? My work provides 14 weeks full pay or 28 weeks at half pay. I have no concerns over my ability to budget I am just trying to work out which approach will work better financially. Factors to consider.
1. My pay goes straight onto my mortgage which has interest calculated daily
2. Maternity leave begins in December if I take it at full pay it will all be used by the end of the financial yearn half pay will roll into next year.
Tax wise better at half pay, if you can afford it.
Given the way the tax scales work your after tax income will be more than half of what you get now (you’ll lose less money to tax).
Even better if your half pay maternity payment rolls into the new financial year. Depending on your other income that year you may have all of your tax refunded for the 18/19 year come tax time.
Great question. My wife is currently pregnant and will be going on maternity leave in mid January. Her employer also provides 14 weeks full pay, or 28 weeks at half pay - just like your situation. She'll also get the government paid parental leave (double dipping - I don't agree with it, but while it is available I have no moral objection in taking it because if I don't take it, they won't give it back to me in reduced taxes).
Firstly, the sooner you can get the money into your pocket the better, because as you say, it can sit on your mortgage saving you interest.
The big question is can you save tax by spreading out your maternity leave payments over separate financial years, lowering your marginal tax rate.
For you, I can't see any big benefit in doing one over the other as if it is starting in December, 28 weeks will still be virtually fully exhausted by the end of the financial year.
If however you are also going to get the paid parental leave (and then perhaps take some unpaid leave) then you will probably best to try spread that into the new financial year (ie. if you take your employer maternity leave at full pay so it is exhausted around March, then don't take the government paid parental leave until July - just check the rules on how long you can delay it)
My wife is virtually taking the entire 2018 off, so her maternity leave falls neatly over 2 financial years, so we didn't have to do too much jigging around to even out her 2 financial years of income so we didn't pay unnecessary tax on one of those years. She'll be taking her's at full pay, then taking some unpaid time off, then starting the government paid parental leave in July.
Hi Mary, as the previous two comments have raised, from a tax perspective, it will principally depend on what your taxable income will be in the 2019 year ( as compared to your 2018 year) and planning the timing of the receipt of your taxable income to attempt to level out your taxable income between the 2018 and a 2019 years.
Whilst getting the money earlier allows you to save interest on the mortgage, I suspect the tax savings in the 2019 year if your other 2019 income is modest, would be greater than the interest savings.
Good luck with what must be exciting time for you.