Maternity and paternity pay for limited company directors
Direct Answer
A director can claim Statutory Maternity Pay (SMP) or Statutory Paternity Pay (SPP) as an employee of their own company — but only if their average weekly earnings reach the Lower Earnings Limit (£129/week for 2026/27) and they meet the continuous-employment and notice conditions. The trap: a typical low tax-efficient salary can drift below that threshold, cutting entitlement. Because SMP is earnings-based, dividends don't count toward it — but they can continue during leave as an alternative income stream. And the company can usually recover 92% (or 103% under Small Employers' Relief) of the SMP from HMRC, separately from whether it can claim Employment Allowance.
Why your salary level decides your entitlement
SMP and SPP are statutory employee benefits. To get them, you must be an employee of your company (most working directors are, via a contract of employment or by drawing a salary), have the required continuous service, and — critically — have average weekly earnings at or above the Lower Earnings Limit (£129/week for 2026/27) for National Insurance over the relevant reference period.
Contractors often set a salary that's tax-efficient but low. If it sits below the Lower Earnings Limit, you may not qualify for statutory pay at all. If you're planning a family, the salary you set in the year before the reference period is what counts — this is a decision to make early, not once you're on leave.
How much SMP is, and for how long
| Period | Rate |
|---|---|
| First 6 weeks | 90% of average weekly earnings (no cap) |
| Next 33 weeks | Lower of £194.32/week or 90% of average weekly earnings |
| Total | Up to 39 weeks |
Because a director's salary is usually modest, the 90% element may be small — but the flat-rate weeks are the same as for any employee. Statutory Paternity Pay is shorter (up to two weeks) and paid at the same formula: the lower of £194.32/week or 90% of average weekly earnings.
Paternity: leave right vs pay right — don't confuse them. From 6 April 2026, paternity leave became a day-one right (no minimum service) under the Employment Rights Act 2025. But paternity pay still requires 26 weeks' continuous employment. So a director can be entitled to take the leave yet not qualify for the statutory pay — a common point of confusion.
The recovery point. The company pays the statutory amount through payroll, then recovers it from HMRC — 92% as standard, or 103% under Small Employers' Relief (which most one- or two-person companies qualify for, since SER applies when the company's Class 1 NI liability in the qualifying year is below the SER threshold). So for a one-person company the cash impact is often close to neutral — or even slightly positive — provided you qualify in the first place.
Worked example — a sole director reclaiming from "itself"
Because a sole director is both the employer and the employee, the mechanics look odd but are routine: the company pays you the SMP through the normal payroll, reports it on the FPS, and then recovers it via the EPS (Employer Payment Summary) — offsetting the recovered SMP against the PAYE/NIC the company owes HMRC that month. If the recovery is more than the PAYE/NIC due (very likely for a one-person company), HMRC pays the balance to the company. In effect the company hands you the maternity pay and gets 92–103% of it back from HMRC through the same PAYE account.
The dividends alternative
Dividends are paid on your shares, not for work — so, subject to the company having enough distributable profit, they can generally continue while you're on leave and you remain a shareholder. This is how many director-shareholders bridge the income gap that low statutory pay leaves.
Key point: dividends are not earnings, so they neither build up nor reduce your SMP entitlement — they sit alongside it. But they're taxed as dividend income as usual, and taking a large dividend in a leave year can stack with other income for your tax bands. See the dividend questions and the salary and dividend split to plan it.
Employment Allowance — a common source of confusion
People often assume that because a single-director company usually can't claim Employment Allowance, it also can't reclaim statutory pay. That's wrong — they're different schemes:
- Employment Allowance offsets employer's National Insurance, and most companies whose only employee is a single director are excluded from it.
- SMP recovery is a separate mechanism that lets the company reclaim the maternity pay it hands out — being outside Employment Allowance doesn't affect it.
For the Employment Allowance rule in full, see Employment Allowance for limited companies and payroll for directors.
Planning a family? Get your salary set right — in advance.
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