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New Enterprise Allowance Scheme Explained

I’ve updated this post on 20 July 2020 for the latest legislation

The New Enterprise Allowance Scheme (‘NEA’) is a government initiative to help people start a business who are currently receiving job seekers allowance (JSA).

So if you are out of work you could take advantage of this government grant and free mentoring to take you from job seeker to business owner.

In this guide, I’ll show you the NEA rules, how to check if you’re eligible and how you can get started applying for your cash payment to start your business.

How Does the New Enterprise Allowance Scheme Work?

The NEA provides a cash grant and mentoring to eligible people to help them with business planning and advice to get their business idea off the ground.

Initially, support is provided to help explore your business idea and its viability. Then you’ll receive help from a mentor to create your business plan.

Once your business plan is approved, your cash NEA weekly payment will begin.

How Much Do You Get?

You’ll get £1,274 over 26 weeks under the rules of the new enterprise scheme 2019/2020.

The allowance is paid out at a rate of £65 per week for the first 13 weeks and £33 per week for the next 13 weeks.

In addition to the NEA, you can also apply for a government-backed 5 year Start-Up Business Loan through Start Up Loans. That can be useful because £1,274 may not be sufficient to get your business started and running at full capacity.

Remember, just because you have been accepted for the NEA it doesn’t automatically mean you are approved for a Business Loan. You’ll need to apply for this loan separately, using your business plan and have your creditworthiness assessed.

Who is Eligible?

The NEA is available to aspiring business owners who are over 18 and:

  • either they or their partner is receiving Universal Credit, Jobseeker’s Allowance or Employment and Support Allowance
  • receiving income support and a lone parent, sick or disabled.

How to Apply for the NEA Scheme

If you want to apply for the NEA, then you’ll need to talk to your Jobcentre Plus work coach. They’ll help you check your business idea and work out if you’re eligible and its impact on things like universal credit or job seekers allowance.

Does the New Enterprise Allowance Affect Universal Credit?

Whilst your universal credit will not be affected, you will stop receiving job seekers allowance.

You can continue to claim JSA while you work on your business plan, but once you start your business your JSA will stop and be replaced by your weekly NEA allowance.

The NEA does not affect:

  • Housing benefit
  • Council tax benefit
  • Tax credits

Is the New Enterprise Allowance Payments Taxable?

No, the allowance is exempt for income tax, Class 4 National Insurance (but not Class 2 National Insurance) and tax credit purposes.

National Insurance Rates

What to Include in Your NEA Business Plan

Your assigned mentor will provide you with guidance on preparing your NEA business plan. But as a minimum you should make sure you include:

  • A full description of your business idea;
  • When you plan to start your business;
  • A financial plan showing your incomings and outgoings;
  • A personal budget plan including your income and how that will cover your personal costs;
  • How you will repay your business loan, if you plan to take one out;
  • Demonstrate your business is sustainable.

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Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - a UK small business finance blog where she shares help and advice with the self-employed community to make topics like registering a business, bookkeeping and taxes easy to understand.