Tom Slevin explains what employers need to know
Having children is an exciting period in someone’s life and financing the parental leave period may not be at the forefront of a dentist’s mind. However, you may be away from work for six to 12 months and it is important that you take the time to ensure your finances are in order to cover your leave period.
For dentists treating NHS patients, it is important to know whether you are eligible for parental leave pay, how much you will receive, when you will receive these payments and how to make a correct claim.
Eligibility
As a dentist working in an NHS practice you may be entitled to NHS maternity/paternity/adoption leave pay. To be eligible, you need to have:
- Been named on an NHS dental performers list for two years with 26 weeks continuous engagement on the contract before the week you are due to give birth. This period must precede the 15th week before they are due to give birth. For the purpose of the two years, the foundation training year is taken into account,
- Stopped performing dental services on the contract once taking parental leave,
- Not registered as a limited company
One of the most common questions I receive about the eligibility is whether a dentist needs to be an active member of the NHS Pension Scheme to receive parental pay. The good news is that there are no requirements for a dentist to be contributing to the NHS Pension Scheme to receive parental pay.
However, those associate dentists who are trading through a limited company and receiving their NHS pay into their limited company will not be eligible for parental pay. Associate dentists who are therefore working in an NHS practice but trading through a limited company should carefully consider whether this is the right choice for them if they are going to have children in the coming years.
Payments
Parental pay will be different for each dentist as the pay is based on the performers estimated Net Pensionable Earnings (NPE) or Net Pensionable Earnings Equivalent (NPEE) on Compass at the date the payment is due. A common misconception we see, is that dentists believe their parental pay will be based on their declared NPE that was submitted on the latest Annual Reconciliation Report (ARR). However, the current estimated NPE/NPEE on Compass is used to determine the dentists’ parental pay. It is therefore vital that you know what this figure is and whether it is accurate.
To check your estimated NPE/NPEE, you should sign into Compass and check the last two monthly payment schedules. On the monthly payment schedules, the figure for your monthly payment is your estimated NPE/ NPEE. You should check your last two monthly payment schedules to ensure this figure is consistent across both periods. If the monthly payments are different, then your estimated NPE/ NPEE has been amended in the last two months and the monthly payment on your schedules may not show your actual average monthly NPE/NPEE. In this case, you can go to the pension section on Compass, select Pension Contributions Search and select the current financial year. This will tell you your year to date NPE/NPEE, which can be converted to your monthly estimated NPE/NPEE.
The monthly estimated NPE/NPEE will determine how much you will receive in parental pay. This monthly figure is converted into a weekly payment figure and while you are on maternity leave will receive 26 weeks of parental pay, while those on paternity leave will receive two weeks of parental pay.
The weekly payments cannot exceed £1,660 for dentists (equivalent to an annual NPE/NPEE of £86,320) and for orthodontists, the weekly payment cannot exceed £3,630 (equivalent to an annual NPE/NPEE of £188,760).
You should check that the estimated NPE/NPEE on Compass is an accurate reflection of your NHS pay in the financial year. If the estimate is lower than you are actually receiving on average each month for your NHS work, then your practice should update your estimate using the Contract Allocation Form (CAF) that can be found on the NHS BSA website. If you are unsure if the estimate is accurate, you should seek financial advice to ensure they will receive the correct parental pay.
The parental leave payments will be paid to the practice on their monthly schedule. The practice will then need to pay this over to the dentist. Those who are members of the NHS Pension Scheme will continue to have pension deducted from their parental leave pay. NHS parental leave payments are taxable and dentists should ensure they are saving some of their payments for their future tax liabilities.
Statutory maternity allowance
As dentists are self-employed, they are also entitled to statutory maternity allowance (MA). It can be paid for up to 39 weeks and you will receive up to £151.97 per week for 39 weeks. You will receive £151.97 per week if you have been registered with HM Revenue and Customs (HMRC) for at least 26 weeks in the 66 weeks before the baby is due and you have paid class 2 national insurance contributions for at least 13 of the 55 weeks before the baby is due.
A claim for MA can be made using the MA1 claim form. You should ensure you make a claim for MA as this will be deducted from your NHS parental pay each month.
Once the claim has been made, most dentists will receive a letter back stating that they will not receive the full MA as they are not up to date with their class 2 national insurance contributions. HMRC will then write to you requesting an advance payment of up to 13 weeks of class 2 National Insurance (up to £40.95 of class 2 national insurance to pay). This should be paid by the dentist and your class 2 national insurance contributions due in the following January will then be reduced.
Maternity allowance can be claimed as soon as you have been pregnant for 26 weeks and payments can start up to 11 weeks before the baby is due. Maternity allowance is not taxable.
Making a claim
You can make a claim for parental leave payments using the Application for Parental Leave Payment Under the Statement of Financial Entitlements (SFE(PL)) form. This can be found on the NHS BSA website. You will need to enter your parental leave period, estimated monthly NPE/NPEE and also submit a Maternity Certificate with the form.
You should ensure their estimated monthly NPE/NPEE is accurate before submitting this form as the NHS will only change an approved form in very limited circumstances.
Other considerations – payments on account and child benefit
Even with dentists receiving the NHS parental payments, your income for the tax year may be reduced compared to the previous tax year. You should speak to your accountant to determine whether you are able to reduce your tax payments on account, which can ease pressure on your cash flow while on parental leave.
Child benefit can be claimed from the date of the birth of the baby. Claims can be made on form CH2 once the birth is registered. It can take up to 16 weeks for the form to be processed and child benefit can be backdated for up to three months. Only one parent can get child benefit and the claimant will get national insurance credits towards their state pension if they are not working.
As a dentist, you should however be aware of the High Income Child Benefit Tax Charge (HICBC). If either parent is earning above £50k of income, then some or all of the child benefit will need to be repaid on the highest earners tax return. The charge is equal to one per cent of the child benefit for every £100 of income that the higher earner is over £50k of income each year. If the highest earner’s income is over £60k all of the child benefit will need to be repaid. The claimant can opt to not receive the child benefit payments but still receive the national insurance credits so the HICBC will not apply.
(Tom Slevin is a chartered accountant at Morris and Co and a member of NASDAL.)