Small businesses often have to make payments to employees to cover statutory maternity and paternity pay. If your business cannot afford to make such payments, you can ask HMRC to provide an advance payment to help your cash flow.

HMRC offers financial help to small businesses to assist with their cash flow when they have to make statutory payments to employees (including directors).

The cost of your company’s statutory payments (excluding sick pay) are usually offset against your company PAYE liabilities. However, if the total of your PAYE deductions for items such as income tax, national insurance contributions, student loans etc. is less than the cost of the statutory payments you need to make, you can apply for advance funding from HMRC.

When might you need an advance from HMRC?

Imagine you run a small business with three employees. One employee is going on maternity leave and you need to pay them £2,000 in Statutory Maternity Pay. Your business normally pays its employees' wages before recovering statutory payments from HMRC through payroll.If your business doesn't have enough cash available to cover the statutory payment, you can apply to HMRC for advance funding.

How to apply for an advance payment

You can apply online to be paid in advance for:

• Statutory Maternity Pay (SMP)
• Statutory Paternity Pay
• Statutory Adoption Pay
• Statutory Shared Parental Pay (ShPP).

You can apply for advance funding for these payments if you cannot afford to make the payments yourself. You can apply up to four weeks before you want the first payment. If you apply earlier than this, HMRC may return your application.

Before applications can be made, you’ll need to provide us with a copy of your MATB1 form (a scanned copy will do). This can be obtained from your GP, Doctor or Midwife on or after the 20 week scan. You’ll also need to confirm the date you wish to start your maternity leave.

An application for an advance payment should be made no more than four weeks before the first statutory payment is due to an employee. If you apply earlier than that, HMRC may return your application.
You can be charged a penalty (up to £3,000 per employee for each tax year) if you include incorrect information in your application. 

You need to use your payroll software to send an Employer Payment Summary (EPS) as well as a Full Payment Submission (FPS) if you reclaim statutory maternity, paternity, adoption or shared parental payments - even if you received an advance payment from HMRC to cover them.

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What are my employees entitled to?

By law, your company employees (including directors) are entitled to the following.

Statutory Maternity Leave

Eligible employees can take up to 52 weeks maternity leave. The first 26 weeks is known as ‘Ordinary Maternity Leave’, the next 26 weeks is known as ‘Additional Maternity Leave’. The earliest date that leave can be taken is 11 weeks before the expected week of childbirth, unless the baby is born early.

Employees must take at least two weeks leave after the birth (or four weeks if they’re a factory worker).

Statutory Maternity Pay (SMP)

SMP for eligible employees can be paid for up to 39 weeks, usually as follows:

• the first six weeks: 90% of their average weekly earnings (AWE) before tax
• the remaining 33 weeks: £194.32 for the 2026/27 tax year or 90% of their AWE (whichever is lower).
  

Income Tax and National Insurance Contributions still need to be deducted.

If you're a small employer and your business qualifies for Small Employers Relief you can usually claim 109% of employees’ Statutory Maternity, Paternity, Adoption and Shared Parental Pay.  If your business paid more than £45,000 in Class 1 National Insurance (employee and employers) then you won't qualify and you will then usually be able to reclaim 92% of the payments.

How does the 109% recovery rate work?

If you qualify for Small Employers' Relief and pay an employee £1,000 in eligible statutory pay, you could potentially reclaim £1,090 from HMRC. The extra £90 represents the additional 9% compensation available to qualifying small employers.

Statutory Paternity Leave and Statutory Paternity Pay

Employees may be eligible for Statutory Paternity Leave and Pay if they and their partner are:

• having a baby
• adopting a child
• having a baby through a surrogacy arrangement.

Statutory Paternity Leave

Employees can choose to take either one week or two consecutive weeks’ leave. They can also take two separate one-week periods of leave. The amount of time is the same even if they have more than one child (for example twins).

From 6 April 2026, employees are entitled to Paternity Leave from their first day of employment.

Leave can’t start before the birth. The start date must be one of the following:

• the actual date of birth or date of placement for adoption
• an agreed number of days after the birth or placement for adoption
• an agreed number of days after the expected week of childbirth.
  

Leave must be taken within 52 weeks of the birth (or expected week of childbirth if the baby is born early).

If you are adopting, your period of Paternity Leave can start:

• on the date of placement
• an agreed number of days after the date of placement
• on the date the child arrives in the UK or an agreed number of days after this (overseas adoptions only)
• the day the child was born or the day after if you’re working that day (surrogate parents)

Leave must be taken within 52 weeks of the date of placement or, for overseas adoptions, the date the child arrives in the UK.

Statutory Paternity Pay

Statutory Paternity Pay for eligible employees is either £194.32 a week or 90% of average weekly earnings (whichever is lower). Tax and National Insurance need to be deducted. Some employment types, like agency workers, directors and educational workers, have different rules for entitlement.

Before applications can be made, you’ll need to complete the online SC3 form. Print it, sign it and return it to Crunch (a copy or scan is perfect).

You must make sure your paternity leave and pay policies are clear and easily accessible to staff.

If you're a small employer and your business qualifies for Small Employers Relief you can usually claim 109% of employees’ Statutory Maternity (SMP), Paternity, Adoption and Shared Parental Pay.  If your business paid more than £45,000 in Class 1 National Insurance (employee and employers) then you won't qualify and you will then usually be able to reclaim 92% of the payments.

2026/27 statutory pay rates at a glance

Other Statutory Payments Crunch can help with

There are other Statutory payments available to employees such as Statutory Adoption Pay, Shared Parental Pay and Additional Statutory Paternity Pay that we can also help with. If you’re already a Crunch client, then for more information regarding these benefits and whether you could get them, please contact your client manager at support@crunch.co.uk  and we can submit the application on your behalf.

If you’re not a Crunch client, we’d be happy to talk to you about how Crunch could help your business or you can get further information on the benefits and how to apply for them from the Gov.uk website.