Self-employed women to lose maternity rights under new tax

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Date: 17 March 2020

Maternity pay news

Note: due to the fast moving nature of the COVID-19 outbreak, the situation is changing rapidly. Since this news article was written, the government has announced that the tax changes mentioned in the article below will be delayed until April 2021.

Legislation coming into effect from April 2020 will remove the current maternity rights of self-employed female worker, affecting tens of thousands of women in the UK.

Changes to off-payroll rules will see many self-employed freelancers being classified as "deemed employees". This means they will be taxed like employees but will not get the same rights as other employees.

Currently, most professional freelancers operate using their own limited companies, working for clients on a project-by-project basis. After expenses and paying themselves a modest salary, they make profits which are subject to corporation tax - and in some cases then withdraw money from the company as dividends, which is subject to income tax.

Like sole traders, they also pay national insurance contributions, which then entitles them to claim for statutory maternity pay when they take time off to have a baby.

However, ContractorCalculator has warned that under the design of the new rules, contractors' clients are able to classify them as "deemed employees" and make national insurance deductions and income tax at source. But, in this instance, no employment rights at all are conferred on the worker.

ContractorCalculator has described the new system as "draconian". It says the new "zero rights employment" status will classify pregnant women as "deemed employees", stripping them of their rights to maternity pay.

A recent survey of 12,237 contractors conducted by ContractorCalculator shows that there is widespread confusion about the new rules. The findings indicated that just 27% of contractors are likely to be able to continue working as they were before, leaving the remaining 73% classified as "deemed employees" whilst being stripped of the rights they currently receive under their current set-up.

Dave Chaplin, ceo of ContractorCalculator, said: "Self-employed women should be sipping champagne on [Mother's Day] and celebrating their achievements, but this new Conservative policy which strips them of their maternity rights instead just leaves a nasty taste in the mouth and will leave them feeling flat.

"It's abhorrent that, after the excellent Good Work Plan by Matthew Taylor, the Government is taking steps that take us backwards and which discriminates against women. The entire policy is flawed and must be cancelled."

Written by Rachel Miller.

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