Question submission date: May 2023
Full Question: “As a Limited Company Director, can I take paternity leave and am I entitled to any paternity pay or allowance?”
If you’re expecting a baby whilst an employee of a company, it’s easy to find out how much paternity leave you’re entitled to, what the company policy is and what the statutory allowance is. Things aren’t quite so obvious when you have your own limited company as you are both employee and employer!
Here we’ll keep it straightforward so that you, as a new (or soon to be) Dad know exactly what you’re entitled to, both in terms of time off and pay. Then we’ll take a look at how you go about taking it, and what it means for your Limited Company.
As an employee, albeit of your own company, you can claim up to two weeks statutory paternity leave. This leave must be taken on consecutive weeks (not odd days), cannot be taken before the baby is born (or adopted), and must have finished within 56 days of the birth, due date or adoption date. It’s important to know that if you choose to take this paternity leave, you can’t work while you are claiming, with no exceptions.
The further criteria that you must meet to be eligible for paternity leave is as follows:
- You must give your limited company 15 weeks notice, even if it is your own company
- You need to have been employed by your Limited Company continuously for a minimum period of 26 weeks up to the 15-week notice period
- You must be employed by your Limited Company up to the date the child is born or adopted
- You must be on the payroll of your limited company and earn a minimum of £120 gross weekly income during an 8 week period
The amount of statutory paternity pay is currently £172.48 per week, or 90% of your average weekly earnings – whichever figure is lower.
During your paternity leave nothing changes in that you can continue to draw your salary from the limited company. The limited company then needs to claim this back from HMRC through payroll. Your accountant will be able to deal with this for you.
What happens if I’m the Sole Director and the only employee?
Many people with a Limited Company don’t employ anybody else. But if you’re paying yourself through PAYE (therefore paying Class 1 National Insurance contributions) you are still entitled to paternity leave, as outlined above, if you chose to take it.
If you’re unsure about your entitlement or want to talk through your options speak to your accountant. They will be able to advise you as to what would be best for you and your company, and deal with HMRC on your behalf to ensure everything is handled correctly.