If you’re the only director of your limited company and planning maternity leave, payroll can suddenly feel very confusing.
You’re not “going to work” in the traditional sense. You don’t see yourself as an employee. Yet, HMRC still expects certain things to happen.
So what happens to payroll when a sole director goes on maternity leave? Let’s break it down clearly and without jargon.
First things first: are directors treated like employees?
Yes – for PAYE purposes, directors are employees.
That means:
- You can be paid a salary
- Payroll still applies
- RTI submissions still need to be made
But maternity pay for directors works slightly differently to regular employees, which is where a lot of the confusion comes from.
Can a sole director get Statutory Maternity Pay (SMP)?
Possibly, but not automatically.
To qualify for SMP as a director, you must:
- Be paid through PAYE
- Have been on payroll for long enough
- Earn at least the Lower Earnings Limit
- Meet the qualifying week rules
Here’s the catch, many directors don’t qualify because they:
- Pay themselves a very low salary
- Only top up income via dividends
- Haven’t been on payroll consistently
This is why planning early matters. By the time you’re heavily pregnant, it can already be too late to change eligibility.
What happens to payroll when you’re on maternity leave?
This surprises a lot of people. Payroll doesn’t stop just because you stop working.
While you’re on maternity leave:
- Payroll still needs to run
- RTI submissions still need to be filed
- Payslips still need to exist
- SMP (if eligible) is processed through payroll
Even if:
- The business activity slows down
- You’re not actively working
- Income is reduced or paused
Admin still needs to happen.
“But I’m the only director… who runs payroll?”
Good news, you don’t need to be working to remain a director.
Payroll can still be:
- Run via software
- Handled by an accountant or payroll agent
- Managed in advance with clear systems
You’re allowed to step back from day-to-day work. You’re not allowed to ignore payroll obligations, but this is about systems, not stress.
Cash flow: the part most people don’t plan for
Maternity leave can feel financially uncomfortable unless you plan. Things to consider:
- When SMP (if applicable) is paid
- How long income may be reduced
- Whether the business has reserves
- How drawings will work during leave
This isn’t about “cutting back”, it’s about knowing what’s available so you can relax and focus on your baby, not your bank balance.
Common mistakes we see (all of which are avoidable)
- Stopping payroll entirely
- Assuming SMP is automatic
- Not checking eligibility early enough
- Leaving planning until the last minute
- Feeling embarrassed for not knowing this already
None of these mean you’ve failed. They just mean no one explained it properly.
What to do before maternity leave (simple checklist)
If you’re even thinking about maternity leave, check:
- Are you on payroll?
- Are you paid enough to qualify for SMP?
- Who will run payroll while you’re off?
- Do you understand your cash flow for the next 6 to 12 months?
You don’t need perfection, just clarity.
Final thought
Maternity leave shouldn’t feel risky or financially scary just because you run a business. With the right setup:
- Payroll can run smoothly
- Income can be planned
- Stress can be reduced massively
- You can actually enjoy the time you’ve worked so hard to create
If this feels overwhelming, that’s a sign you need support so stop Googling! You don’t have to do this alone.
Need some help? Give us a call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 20-minute call with Yarka – https://calendly.com/yarka-ssa/20min
