Having children is an exciting period in someone’s life, but financing the parental leave period may not be at the forefront of a dentist’s mind. As you could be away from work for 6-12 months, it’s important to take time to ensure your finances are in order to cover your leave period.
For dentists treating NHS patients, it’s important to know whether you’re eligible for parental pay, how much you will receive, when you will receive these payments and how to make a correct claim.
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:
- Be 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 the due date. For the purpose of the two years, the foundation training year is taken into account.
- Stop performing dental services on the contract once parental leave commences.
- No be registered as a limited company.
One of the most common questions I get about 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 in order to receive parental pay.
However, associate dentists trading through a limited company and receiving their NHS pay into their limited company are not eligible for parental pay. If you’re an associate dentist working in an NHS practice but trading through a limited company, you should carefully consider whether this is the right choice if you plan to have children in the coming years.
Parental pay will be different for each dentist, as the pay is calculated based on the performers estimated Net Pensionable Earnings (NPE) or Net Pensionable Earnings Equivalent (NPEE) on Compass the the date the payment is due. A common misconception is that dentists believe their parental pay will be based on their declared NPE submitted on the latest Annual Reconciliation Report (ARR). However, it’s the current estimated NPE/NPEE that is used to determine a dentists’ parental pay. It’s therefore vital that you know wat this figure is, and whether it’s accurate.
To check your estimated NPE/NPEE, sign into Compass and check the last two monthly payment schedules. One the monthly payment schedules, the figure for your payment is your estimated NPE/NPEE – the figure should be consistent across both periods. If the monthly payments are different, then your estimated NPE/NPEE has been amended in the last 2 months and the figure on your schedules may not show your actual average monthly NPE/NPEE. In this case, 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 NPE/NPEE.
The monthly estimated NPE/NPEE will determine how much you’ll receive in parental pay. This monthly figure is divided into a weekly payment figure which you’ll receive as parental pay for 26 weeks whilst on maternity leave, and 2 weeks whilst on paternity leave.
The weekly payments cannot exceed £1,660 for dentists equivalent to an annual NPE/NPEE of £86,320) and £3,630 for orthodontists (equivalent to an annual NPE/NPEE of £188,760).
Parental leave payments are paid to the practice on their monthly schedule, the practice then pays this over to the dentist. Those who are members of the NHS pension scheme will continue to have pension deductions taken from their parental leave pay. NHS parental leave payments are taxable and dentists should ensure they are saving some of their payments for 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 if you have been registered with 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 stating that they will not receive the full MA as they are not up to date with their class 2 NIC. HMRC will write to you requesting an advance payment of up to 13 weeks of class 2 NI (up to £40.95). This should be paid by the dentist and then your class 2 NIC due in the following January will 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 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 cashflow whilst on parental leave.
Child benefit can be claimed from the date of 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 3 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 be aware of the High Income Child Benefit Tax Charge (HICBC). If either parent is earning above £50k income, then some or all of the child tax benefit will need to be repaid on the highest earners tax return. The charge is equal to 1% of the child benefit for every £100 of income that the higher earner is over £50k 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 that HICBC will not apply.