Does New Enterprise Allowance Affect Universal Credit?
The New Enterprise Allowance scheme was set up by the UK Government to provide support and guidance to eligible candidates and encourage entrepreneurship. This blog post aims to help in answering the question of whether the New Enterprise Allowance affects the payments of Universal Credit while conducting their means test. For a more holistic view of the topic, we will discuss the eligibility criteria, application process and potential alternatives to the New Enterprise Allowance.
Does New Enterprise Allowance Affect Universal Credit?
No, the New Enterprise Allowance does not affect Universal Credit.
The New Enterprise Allowance is a support scheme that provides mentoring, a weekly allowance and a business loan to potential entrepreneurs who are 18 years of age or older. The scheme is administered by JobCentre Plus and is open to individuals who claim Universal Credit.
Many Universal Credit claimants who were previously self-employed and faced financial challenges as a result of Covid-19 found financial, technical and advisory support through the New Enterprise Allowance.
However, not all Universal Credit claimants are eligible for New Enterprise Allowance. The scheme can only be claimed by those Universal Credit claimants who fall within the below-listed conditionality groups:
- all work-related requirements
- work preparation
- work focussed interview only
Payments received through the New Enterprise Allowance are not counted as income during an applicant’s means test for Universal Credit. However, if you apply for the scheme, you must inform the DWP through your Universal Credit account as this is a change of circumstances that must be reported to authorities.
When your Universal Credit payments are calculated each month, the authorities take into consideration your earnings throughout a certain month. However, Universal Credit claims do not require claimants to limit their work opportunities and encourage claimants to look for work while they claim benefits.
It is important for claimants to understand that even when there is a means test regarding their Universal Credit claim, their benefits payments will not be affected as long as they are on a low income and their savings or capital do not exceed the £16,000 threshold.
However, earnings that come from any of the following sources will count towards your monthly financial assessment while you claim Universal Credit:
- salary, overtime, tips or commission
- holiday or pay
- maternity or paternity pay
- adoption or shared parental pay
Therefore, getting financial and technical support through a scheme as the NSA would only improve the likelihood that claimants will be able to use their claimed allowance and grant to start a business of their own and will no longer depend on benefits payments to meet their living costs; even if it takes some time for them to achieve financial independence.
Who Is Eligible For New Enterprise Allowance?
To be eligible for New Enterprise Allowance, one must be:
- 18 years of age or older
- legally resident in the United Kingdom
- have the right to take up self-employment or paid work in the United Kingdom
Since the scheme is aimed at supporting unemployed individuals who wish to start their business, an applicant should be claiming one of the following benefits to be eligible for New Enterprise Allowance:
- Universal Credit
- Jobseeker’s Allowance
- Employment And Support Allowance
In addition to this, if someone is claiming Income Support and is a lone parent, ill or disabled, they can apply for the allowance as well.
What Happens Once You Join The New Enterprise Allowance Scheme?
Once you join the New Enterprise Allowance Scheme, a business mentor will be assigned to you. They will guide you on how to devise and design your business plan. Based on the business idea that a claimant has, a mentor will provide the required assistance and support in developing a practical and revenue-generating business venture.
If you need guidance on how to draft a business plan, you can take guidance from an online template.
When your business plan is approved, you will start receiving financial support. This includes a weekly allowance of £1,274 for the next 26 weeks as well as a start-up loan facility.
Once you start trading through your business, your mentor will continue providing ongoing assistance during the initial few months.
However, you must know that the New Enterprise Allowance scheme ended in January 2022. Therefore, if you wish to seek financial and/or technical advice to start your one business in the UK, you may have to apply for other Government Grants or independent schemes to find the assistance you need.
Are There Any Other Grants For Small Businesses In The UK?
Yes, there are several grant schemes for small businesses in the UK. There are schemes that are supported by the UK Government to provide support to promising entrepreneurs aiming to start a small business as well as independent grants.
Some of the Government supported grants in the UK include the following:
- Innovate UK is part of UK Research and Innovation (UKRI) and helps UK businesses develop innovative products, services, and processes by providing tailored support, grant funding and loans or procurements.
- R&D tax reliefs provide support to new businesses in conducting research or advancing in their field by claiming tax relief on costs related to the research such as staff salaries.
- Grants for taking on an apprentice can be claimed if you are training an apprentice in your small business.
- Grants for installing high-speed broadband are available for businesses established in rural areas. They can claim vouchers worth up to £3,500 to set up new gigabit-capable connections
As for independent grants for small businesses, you can refer to Local Growth Hub Contacts if you are in England, Scottish Enterprise if you are in Scotland, Established SME Funding if you are in Northern Ireland and Grants | Business Wales if you are in Wales.
The discussion in this article helps to draw the conclusion that financial support received through the New Enterprise Allowance bears no impact on the Universal Credit payments that one claims. In fact, many UC claimants have found financial and strategic advice while claiming the benefit and starting their own small businesses through the New Enterprise Allowance scheme.