As one of our most popular articles we have updated this for 2016.
The New Enterprise Allowance (NEA) is one of the flagship policies by which the government hopes to translate the UK’s entrepreneurial spirit into a new wave of profit-generating companies. But what does the NEA consist of, and can you benefit from it?
What is the New Enterprise Allowance?
The New Enterprise Allowance is a package of support aimed at would-be entrepreneurs aged 18 and over and currently in receipt of Jobseeker's Allowance. From 2013 onwards the NEA is also available to Employment and Support Allowance claimants in the Work Related Activity Group (WRAG), and lone parents in receipt of Income Support.
The NEA provides practical and financial support to individuals in those categories who wish to start their own businesses. It consists of a combination of business mentoring, a weekly allowance, and a business loan.
Once you join the scheme you will be assigned a business mentor. This individual will help you put together your business plan, and will support you in turning your idea into a realistic, revenue-generating venture. Your mentor will stay with you, providing ongoing assistance during your first few months of trading.
When your business plan has been approved, you will be given access to the financial support. This comes in the form of a weekly allowance, and a start-up loan facility.
How much could I claim?
The NEA weekly allowance is £65 per week for the first 13 weeks, and £33 per week for the second 13 weeks. The allowance is paid for a maximum total of 26 weeks. Meanwhile the loan is available up to £1,000. Although the loan is credit scored, reports suggest that the loan providers are comparatively lenient with regard to poor credit histories.
Do I have to stop my JSA?
You can remain in receipt of JSA while you develop your business idea with your mentor. However, you cannot claim the allowance or apply for the loan until you stop your benefit claim and started trading.
You should remember, though, that the NEA does not affect your entitlement to Housing Benefit or Council Tax Benefit. It also will not affect your tax credit position, and is not considered when calculating your Income Tax bill.
What are the disadvantages?
Although the New Enterprise Allowance can be very useful for those who wish to start a business, it is important to understand that there are some potential downsides to the programme. The first is the requirement that you give up your JSA before you receive the NEA payments. You should work closely with your mentor to ensure you are confident about your business proposal before you do this.
Some NEA participants have, however, reported difficulties getting in touch with their mentors, and many are unhappy with the level of contact they have received. As such, you may wish to augment the support you receive from your mentor by developing your own knowledge separately. There is a wealth of resources online to help you start your business, including those found in the Knowledge section of the Simply Business website.
Finally, it is also worth remembering that £1,000 may simply not be enough to start your business. In this case you might consider exploring other potential funding avenues, such as the government's Start-Up Loans scheme.
How do I apply?
Applications for the NEA are made through your Jobcentre Plus. Talk to your JC advisor to find out how to put your name forward.