What is the New Enterprise Allowance?

The New Enterprise Allowance (NEA) is a government grant to help you start your own business or grow your business if you are already self-employed. If you’ve been unemployed for a while, the NEA may give you a weekly allowance of up to £1,274 over 26 weeks.

You’ll also get a designated business mentor to talk you through the process of setting up your own business. They’ll explain how the business world works and help you to make the sort of decisions that’ll secure your long term success.

It’s compulsory to attend all meetings with your NEA mentor. They’ll also set you weekly tasks to help you develop your business’s potential.

If you’ve been unemployed for a while and want to start your own business, you can apply for the NEA to get funding

Who Qualifies for the New Enterprise Allowance?

You must be over 18, and you or your partner must be receiving either:

  • Jobseeker’s Allowance (JSA)
  • Employment and Support Allowance
  • Income Support (if you’re a lone parent, disabled, or you’re dealing with long term illness)

Beyond this, the only stipulation is that your business idea is workable. You’ll need to write a business plan to explain your idea, and to prove that it could work. Your designated business mentor will help you write your business plan and offer some hints and tips on writing the sort of plan that’ll get approved.

If you don’t qualify for NEA, the government still offers plenty of help to anyone who wants to start a business.

How Much Do You Get on the NEA?

For the first 13 weeks you’ll get a weekly allowance of £65 a week. For the next 13 weeks you’ll get £33 a week. This means you’ll get a total of £1,274 over the course of 26 weeks.

At the same time, you can get a loan of up to £25,000 to cover the costs of starting your own business. You will have to pay back this loan, but you don’t have to pay back the allowance itself.

Does the New Enterprise Allowance Affect Universal Credit?

If you’re self-employed and receiving Universal Credit, you can’t apply for the weekly allowance. But you can still get access to an NEA mentor to help you develop your business. And if your self-employed business is less than two years old, you can still apply for a start-up loan.

The NEA system is currently undergoing certain revisions. Potentially, the government may open up NEA to anyone on Universal Credit who does not meet the Minimum Income Floor. This is the number of hours you’re expected to work each week, multiplied by the minimum wage. As a self-employed person, if you earn less than the Minimum Income Floor, you cannot make up the difference with a larger Universal Credit payment. Under new rules, you may be able to apply for extra support through NEA.

Want to know how the New Enterprise Allowance affects your Universal Credit? Sign into your Universal Credit account and contact your work coach.

What Are the Advantages of the New Enterprise Allowance?

Since 2011, the New Enterprise Allowance has helped to launch more than 105,000 businesses. Tailored advice from your own business mentor can set you on the path to success, while helping you to avoid many of the costly mistakes that many new businesses make in the early days.

Plus, with the combination of the weekly allowance and the start-up loan, you could get all the assets you need to bring your business to life.

NEA does not affect your entitlement to Housing or Council Tax Benefits. It won’t affect your tax credit position, and you don’t have to account for it in your income tax.

What Are the Disadvantages of the New Enterprise Allowance?

During the application process and during your initial meetings with your business mentor, you will still receive your JSA. But once you start receiving the allowance, or once you apply for the start-up loan, your JSA stops.

Over the course of the full 26 weeks, the amount you get with NEA is about 25% less than what you’d get with JSA. So, for some people, NEA will be a bit of a gamble.

Plus, £1,274 simply might not be enough to get your business off the ground. And if your business doesn’t take off, you could be left in quite a precarious state – particularly if you also have to pay back a start-up loan.

Another thing to bear in mind – after 13 weeks of NEA, your weekly allowance will be cut nearly in half from £65 a week to £33 a week. Your business may take more than three months to get going. This abrupt cut to your allowance could hit you quite hard.

But there are many NEA success stories out there. You could be one of them. NEA could bring you out of unemployment and set you on the path to being a successful entrepreneur.

How to Apply

You cannot apply for NEA online. You need to talk to your Jobcentre Plus coach. They’ll do an initial assessment of your business idea, and they’ll check your eligibility for the scheme. If you’re eligible, they’ll set you up with your own business mentor, and then your journey will truly begin.

One thing to bear in mind for the long-term – if you are going to set up your own business, sooner or later you’ll have to think about insurance. Business insurance offers an essential safety net. If anything ever goes wrong, insurance will keep you safe, and ensure that you’ll be able to continue trading.

At Tapoly, we are committed to making specialist insurance policies accessible for people who are just in the process of starting their own business. Our cover starts at just 35p a day, with no hidden fees. Head here to get an online quote in just one minute.

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