Maternity pay and tax: what gets deducted

Statutory Maternity Pay counts as earnings, so income tax and National Insurance are deducted from it in the same way as a normal wage ^[1]. For the 2026-27 tax year the standard rate is £194.32 a week, paid for up to 33 weeks after an initial 6 weeks at 90% of average weekly earnings ^[2]. Maternity pay is not a tax-free benefit, and treating it as one is a common payroll error.

The confusion is understandable. Maternity pay replaces a salary, drops to a flat statutory figure, and arrives through the same payslip as everything else. The question of how maternity pay and tax interact matters to employers running their own payroll and to employees checking that the right deductions have been made.

This article sets out whether maternity pay is taxable, how income tax and National Insurance come off it, what the employer pays and recovers, and how pension contributions are handled while an employee is on leave.

Key takeaways

• Statutory Maternity Pay is treated as earnings and is subject to income tax and National Insurance through PAYE.
• The standard weekly rate is £194.32 for the 2026-27 tax year, after 6 weeks at 90% of average weekly earnings.
• Employees often overpay tax during maternity leave and can reclaim it, because the tax code assumes a full year of higher earnings.
• Employers recover 92% of the statutory pay, or 109% under Small Employers' Relief.
• Employer pension contributions continue on full normal salary throughout paid maternity leave, not on the reduced maternity figure.

Is statutory maternity pay taxable?

Yes. Statutory Maternity Pay is taxable and counts towards an employee's total income for the tax year ^[1]. Income tax and National Insurance contributions are deducted in the usual way, exactly as they would be from salary ^[3]. The same treatment applies to Statutory Paternity Pay, Statutory Adoption Pay and Statutory Shared Parental Pay ^[4].

This is different from Maternity Allowance, which is paid by the Department for Work and Pensions to people who do not qualify for SMP, such as the self-employed ^[5]. The mechanics of the statutory figure itself are covered in a separate guide on how much statutory maternity pay is. Maternity Allowance is not taxable and does not pass through payroll. The distinction matters because the two are easy to mix up, yet only one carries deductions ^[4].

How income tax is deducted from maternity pay

Income tax on maternity pay is calculated through PAYE using the employee's tax code, in the same way as any other earnings ^[3]. Because the first 6 weeks are paid at 90% of average weekly earnings and the rest at the flat rate, the taxable amount usually falls part way through the leave ^[2]. Employers running their own SME payroll software apply the code automatically, but the figure on the payslip still needs to be checked against the leave dates.

Tax codes and refunds during leave

The standard tax code for the 2026-27 tax year is 1257L, reflecting the £12,570 Personal Allowance ^[2]. The PAYE system spreads that allowance evenly across the year, on the assumption that pay continues at the same level ^[6]. When earnings drop to the statutory rate, the employee often ends up having paid more tax in the early months than the full year requires ^[4].

That overpayment is usually corrected automatically through the tax code as the year progresses, but an employee who has taken a lump sum or left part way through can ask HMRC to check the position ^[1]. A small business running its own payroll should expect questions about this and be ready to explain that the deductions follow HMRC rules, not employer choice ^[6].

National Insurance on maternity pay

National Insurance is deducted from maternity pay when it exceeds the Primary Threshold of £242 a week for the 2026-27 tax year ^[2]. The standard weekly rate of £194.32 sits below that threshold, so many employees on the flat rate pay no employee National Insurance for those weeks ^[2]. During the first 6 weeks at 90% of earnings, higher earners may still cross the threshold and pay contributions ^[4].

Employer National Insurance works on a separate trigger. The Secondary Threshold fell to £5,000 a year, and the employer rate rose to 15% on 6 April 2026 ^[2]. Employer contributions are therefore due on maternity pay above £96 a week, which most statutory payments exceed ^[3]. The full set of employer duties around notice, leave and record-keeping is set out in a companion guide to employer maternity pay obligations.

What the employer pays and recovers

An employer pays maternity pay through payroll and then recovers most of it from HMRC by reducing its monthly PAYE bill ^[7]. Recovery is not automatic relief on the whole cost: the rate depends on the size of the employer's National Insurance bill in the previous tax year ^[2].

The figures come from the official rates for the 2026-27 tax year ^[2]. Recovery is claimed through the Employer Payment Summary, part of the Real Time Information return that HMRC-recognised payroll software files automatically ^[7].

Small Employers' Relief

Smaller employers recover more than they pay out. The 109% rate returns the full statutory cost plus a 17% compensation element for the employer National Insurance incurred on the payments ^[7]. Eligibility rests on the £45,000 National Insurance threshold for the previous tax year, so a growing business can move in or out of relief from one year to the next ^[2]. Accountants tracking this across a portfolio usually rely on a payroll bureau platform that flags the recovery rate per client scheme ^[7].

Pension contributions during maternity leave

Pension contributions follow a rule that often surprises employers. During paid maternity leave the employer must keep paying its own contributions based on the employee's normal salary, not the reduced maternity figure ^[8]. The employee's own contributions, by contrast, are based on the maternity pay they actually receive ^[8].

The employment contract continues throughout leave, so holiday also accrues and the role is protected ^[9]. An employee may work up to 10 keeping in touch days without ending their maternity pay, and those days are paid as agreed with the employer ^[9]. For a one-off payment outside a regular payroll cycle, some employers use an instant payslip generator to produce a compliant record ^[1].

Conclusion

Maternity pay sits inside the payroll system like any other earnings: taxed, subject to National Insurance, reported through Real Time Information and recovered through the Employer Payment Summary. The flat statutory rate often pushes an employee below the National Insurance threshold and can leave them owed an income tax refund, while the employer still carries pension obligations on the full salary.

The wider direction of travel is worth watching. A government review of the whole parental leave and pay system began in mid-2025 and is expected to report on how statutory family payments are structured, which could change the figures that flow through payroll in future years ^[2]. Until then, the rule stands: maternity pay is earnings, and the deductions follow.

Frequently asked questions

Do you pay tax and National Insurance on statutory maternity pay?

Income tax is deducted from Statutory Maternity Pay through PAYE because it counts as earnings ^[1]. National Insurance is only deducted when weekly pay exceeds the £242 Primary Threshold, so an employee on the £194.32 flat rate often pays no employee National Insurance for those weeks ^[2]. Higher earners may still cross the threshold during the first 6 weeks paid at 90% of earnings.

Can an employee claim a tax refund after maternity leave?

Often yes. The PAYE system spreads the Personal Allowance across the year on the assumption that pay stays level, so dropping to the statutory rate can mean too much tax was deducted early on ^[4]. The overpayment is usually corrected automatically through the tax code, but an employee who left part way through the year can ask HMRC to review it ^[1].

How much maternity pay can an employer recover from HMRC?

An employer recovers 92% of the statutory maternity pay it has paid out, rising to 109% under Small Employers' Relief if its Class 1 National Insurance bill was £45,000 or less in the previous tax year ^[2]. The claim is made by reducing the monthly PAYE payment to HMRC through the Employer Payment Summary ^[7].

Is Maternity Allowance taxed like maternity pay?

No. Maternity Allowance is paid by the Department for Work and Pensions to people who do not qualify for Statutory Maternity Pay, such as the self-employed, and it is not taxable ^[5]. It does not pass through an employer's payroll, so no income tax or National Insurance is deducted from it ^[4].