Self-Employed Mums: How to Get Your Finances in Order

Self-employed mums: how to get your finances in order
By Romi Savova

While taking time off work to have a child can be financially daunting for any parent, it can require much more planning for the self-employed. According to the Office for National Statistics, there’s now over 600,000 self-employed mums in the UK (compared to 1.1 million self-employed fathers)

As a working woman, it can seem like there’s never an obviously good time to have children. Having children necessarily introduces complexity into your life. You may be wondering: “How will I cope financially, and how will this affect my business?”. These are natural questions that fill your mind, but I can attest, the reward of your lovely child is absolutely worth it! 

Making the decision to be a parent takes huge bravery because what comes afterwards isn’t for the faint-hearted. I’m often asked if I think that women can have it all, and my answer is always “yes, so long as you’re willing to make compromises”. My biggest ongoing regret is that I struggle to spend enough time with my small children, but I have also learned that mummy guilt doesn’t go away no matter how much you do! Running a company while raising a family has been exceptionally demanding and there’s never any spare time, but I could never imagine my life without either of them.

While it will be up to you to find the balance between parenting and running your business, thankfully there’s government support available for self-employed mums which can help ease the financial burden.

What are working mums entitled to?

Employed mums are usually eligible for Statutory Maternity Pay from the government. This is paid for 39 weeks at a rate of 90% of your average weekly earnings for the first six weeks, followed by £151.97 per week (2021/22) or 90% of your average weekly earnings (whichever is the lowest amount) for 33 weeks. However most employers will offer a maternity package above and beyond this, so long as you meet certain criteria.

Self-employed mums, on the other hand, can claim a noticeably smaller Maternity Allowance. Depending on eligibility, self-employed mums can receive £151.97 per week (2021/22) for 39 weeks  or 90% of your average earnings (whichever is the lowest amount). To receive this, you need to have been working for at least 26 weeks in the 66 weeks before your baby’s due date, with average gross weekly earnings of at least £30 for a minimum of 13 weeks. 

Making the most of the (limited) benefits available

Meagre maternity pay can pose some financial challenges for self-employed mums. Whether that be making ends meet with costly baby products or affording adequate childcare, while meeting the demands of a growing business. Therefore, it’s worth making the most of available benefits, such as free NHS dental care and prescriptions during pregnancy and up to a year after the baby’s birth. If you’re a first-time mum, or receive certain benefits already, you may also be eligible for the Sure Start Maternity Grant, which is a one-off payment of £500 towards the cost of having a child.  

In addition, you can also claim Child Benefit, which currently pays £21.05 per week for your first child and £13.95 a week for any subsequent children (2021/22). This benefit isn’t means-tested, but if you (or your partner) earns over £50,000 after tax then you’ll have to pay a tax charge. While you may no longer wish to claim the cash benefit, you still need to complete the form to protect your National Insurance Credits, which count towards your State Pension entitlement. This is key as to receive the full State Pension amount of £9,337.80 (2021/22) you’ll need to have paid contributions for at least 35 years.

Getting into good financial shape before and after maternity leave 

Being in good financial shape before you take maternity leave will help to ease some of the pressure. Simple steps such as chasing up any unpaid invoices ahead of your maternity leave, and getting your books in order prior to tax filing deadlines can help you put money aside for your period of leave. Using your 10 paid ‘Keeping in Touch’ days can also provide a financial boost during this time. These days permit self-employed mums to stay in touch with clients and keep their businesses ticking over, slowly easing themselves back into work before the leave period ends. However, working any more than 10 days, will result in the loss of the Maternity Allowance entitlement. 

As a working mum, I know first hand that there usually aren’t enough hours in the day for everything, which may result in pensions not featuring high on the priority list. But having adequate retirement savings is essential for you and your family in later life. 

Finding the extra cash to regularly contribute to your pension during maternity leave can be tricky. But once you’re back at work, it’s important to get back into the habit of making contributions so you don’t fall behind. Using a pension calculator to plan how much you’d like to save once you’re back working can help offset any missed contributions. 

You can find out more about PensionBee’s self-employed pension here.

Romi Savova is CEO at leading online pension provider PensionBee.

Risk warning: As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

 

 

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