New Enterprise Allowance scheme - My story

WPN

If you are aged 18-30 get your backside down to the Princes Trust. They will place you on a 4 day (?) course to get your ready.. and you can apply for a loan of up to £4000 (around £20 loan repayments for first 6 months) at 4% (?) interest. They dont require such indepth information. Meanwhile, go through the NEA hoops at Jobcentre Plus to get the signing off bonus (if you can get that for NEA) and the weekly income (unlike staying on JSA where your business will cause concerns to claim...) - do not bother with a NEA loan. You must try hard for that business plan to get the NEA payments. You must show you will employ someone within the first year.

seeke

The JC finally got its act together, resulting in my first meeting with my mentor. The guy is an experienced self-employed type himself, and I would say he really knows his onions. This was a relief as I was really expecting to be put in touch with an incompetent chancer.

Anyway,this is what I found out/transpired.

1. Once you formally agree to do the NEA, you are given 13 weeks to prepare yourself. This basically means Business Plan, Cash flow forecasts and all that jazz. But also, it is a requirement in my area that the business must be operational by the 13 Week cutoff. AFAICS, this also means that the business should also be showing some signs of an income at this time. I interpret this as meaning that its got to be an actual fledgling business, rather than a never-never pipe dream.

2. The Mentor made a realistic survival budget in order for me to determine financial requirements during the start-up phase.

3. For the loan, your credit rating doesn't have to be perfect, but you are scored, and they will refuse the loan if you don't meet the criteria. So before applying for the loan, try to make peace with any creditors with whom you have defaulted, keep your nose clean with any repayments you do need to make, don't make too many applications for credit and get yo down on the electoral roll.

3. The mentor will give out appropriate advice about drawing up a business plan, cash-flow forecasting and P&L.

4. The mentor will explain how to claim WTC etc as part of the service.

5. Today's meet was mainly administrative. The next meet is on the subject of marketing, so it looks like real mentoring.

cit_k

seeke wrote: »

@boh5

I think the scheme is only suitable for businesses with very low start-up costs. My business idea can be run from a bedroom, and has very low capital costs. In my case, the scheme is ideal. If I combine NEA, WTC and HB together I'm a little better off than I would be on JSA. Plus if the business turns a profit, I get to keep that. So the schemes a great idea for certain types of business. It's also terrific for those people who were going to set up a business anyway.

Having said all this, I'm having difficulty with the mechanics of how to access NEA. My local jobcentre seem to have no idea themselves who provides the mentoring/loans/business plan review. They don't know who runs the scheme basically. This is bizarre:eek:. Anyone else experienced this? Anyone know what I could do about this? The DWP/DirectGov sites give very little information.

What happens out of interest, after the 13 or whatever weeks when payments stop, and your relying on WTC/HB alone?

What sort of NI are you paying?

Will you be eligible to go back on JSA or even sickness benefit if you become ill?

seeke

@ cit k

At this stage, I don't know what the options are if you get sick, and I don't know if it's easy to get back onto JSA if you feel the need. In your business plan you will definitely need to build in a contingency fund to allow for at least temporary sickness, so that you are not wiped out by a couple of weeks of flu.

Your NEA is paid at the rate of £65 for 13 weeks, and £33 for the 13 weeks after that. You are allowed to claim your back to work payment from the JC, which some on this thread have put at £250. You are also permitted to claim HB and WTC etc concurrent with the NEA. These funds used sparingly should mean that you can last for about 9 months without a drop in your income for at least 9 months, and maybe for a year if your business is cheap to run. That is, even if your business makes no money at all. According to my ruff calcs, WTC is likely to be about £200 a month, and this clearly goes quite a long way to replacing JSA.

If your business is still not making any money after a year or so, then you will suffer an approximate £100 a month drop in your income, with the benefits system as it now stands. I have a feeling that Government will begin to assume that (for benefits purposes) the self employed are on at least a minimum wage in future. But for the time being, that's not the case.

So as long as your business makes more than £100 profit a month, then you should suffer no drop on your current income. Personally, I'm aiming to be making about £15000 a year at the end of year two, as aiming to make £1200pa in order to get what I was on JSA is silly, and it's probably a temporary blip in the benefits system that permits this slightly odd business model.

Re NI. I went on a business startup course a few months back where they explained this to us. From memory, you should be paying minimum self employed contributions of about £2/week. If you are earning less than the NI threshold then there's no obligation to pay this, but many do anyway as it's a cheap contribution to your pension. You need 30 years contributions in order to claim a full state pension. If you are earning a "normal salary" type money, then your NI contributions will rise...but I think it's about 10% of your income. Anyway, If you're in this position, it would mean that your business is a going concern, so happy days:T

roguedesigner

The Job Grant is payable to anybody signing off to become self employed. The exact amount will vary depending on your personal circumstances. Couples with children will get it at the higher rate of £250, single people will only get £100.

With respect to NI contributions, you may have to pay two different classes.

Class 2 NICs are paid monthly at the rate of £2.50/week. If you expect your profits to be less than £5315 you may not have to pay class 2 NICs, so if you fall into that category then get in touch with your tax office.

The second type of contribution you may have to pay is the class 4 NICs. These are worked out at the end of the tax year when you fill out your self assessment form. These are charged on profits between £7225 and £42475 at a rate of 9%, and if you have managed to turn a profit of more than £42475 you will pay an additional 2% on anything you made above that.

Obviously class 4 NICs in particular can be quite a large sum so do make sure that you factor those into your financials during the planning stage.

Reading through the posts on here, it seems at least a couple of you guys have dropped on with decent mentoring etc. For anybody thinking of going onto the NEA scheme, remember that this isn't always the case and you might want to have a backup plan. I know for a fact from having been in contact with my local Chamber of Commerce that in this region the mentoring in particular has been subject to some very negative comments, and I can back that up from personal experience; I spent something under 2 hours with my mentor throughout the whole setup period and came away with nothing of any value whatsoever, and they actually went out of their way to avoid being tied down to meetings however much I tried. Yes, I did check my deodorant so it wasn't that. Remember, these people are volunteers and are neither vetted nor are they required to be qualified in any way. Ask your Chamber of Commerce for any free help they have available - I really can't stress this enough.

Another thing worth mentioning is that nobody seems to be in a hurry to start paying the allowance part of the funding once you have signed off. Take the 10 working days claim with a generous pinch of salt and if it's at all possible (and I know that for many people it won't be) try to have a little money put aside to get you out of a hole whilst the DWP gets itself ever-so-slowly into gear.

seeke

@ roguedesigner. Useful info re Class 2 and class 4 NI & back to work grant ,for which I can never remember the details!
My mentor did mention that there was a delay in payment of the NEA, as you say. He suggested that it may be an idea to talk to the JC to see if I could carry on signing-on for JSA until the NEA is paid (seems unlikely), or at least find some funds from somewhere to tide over. Clearly the transition from JSA to NEA isn't as smooth as it should be. Teething problem? Hope so....

WPN

seeke wrote: »

@ roguedesigner. Useful info re Class 2 and class 4 NI & back to work grant ,for which I can remember the details!
My mentor did mention that there was a delay in payment of the NEA, as you say. He suggested that it may be an idea to talk to the JC to see if I could carry on signing-on for JSA until the NEA is paid (seems unlikely), or at least find some funds from somewhere to tide over. Clearly the transition from JSA to NEA isn't as smooth as it should be. Teething problem? Hope so....

They (JCP) wont lend you money. This is the problem with employment these days... some people have to wait a month to get paid. The Government hasn't decided to allow people to claim between 2-4 weeks allowance of the same rate as JSA to be repaid once you get your first payment... this is why the back-to-work bonus comes in... if you are lucky to claim it, its worth £100... (£250 to some) not to be sniffed at, however even that can be tricky to stretch for 4 weeks... not forgetting costs of travel to work.

The NEA wasn't designed to be as good as it could possibly be. So I dont see these as teething problems, although I do hope they reform the scheme. Sadly, this will only happen if most businesses fail to pass the 6-9 month stage or if it became very successful. The chances are it will be somewhere in between those scenarios, and vary upon region, so will be overlooked. This has been a Government stance for decades... focusing on foreign investors and businesses, whilst not really doing enough for homegrown entrepreneurs.

The insulting element (and its really good to see some mentors going the extra mile!!!) is how little its worth... mentoring for the business plan only (some will offer beyond that which is good to see) and a loan... no grant. Compare it to the alternative... "Work Programme" scheme... not only are providers being paid £400 per participant... they can claim up to a few thousand per job outcome. NEA funding (the allowance... same as JSA for 3 months, then half rate for 3 months, and the provider payment) is going to work out cheaper than the cost of someone securing work via the Work Programme along with the continued JSA claim up until then... and you cannot get NEA unless its probable that you will employ someone...

Now it gets a little more complex... there is a big chance the person you will employ might be on the Work Programme, so the WP provider will be getting a few grand whilst you struggle to keep your business afloat. The point I am making is, the NEA is designed to get you to help reduce unemployment (say if there are 10,000 NEA businesses not only is that 10,000 more self-employed people but atleast 10,000 additional people employed ... potentially 40,000 in 5 years time) but you aren't really getting any proper incentive.

The mentors are volunteers... the contracts and provider payments to those running the scheme is a complete waste of money... it would have been better if a grant was available (it wouldnt be a "spend it how you like" payment, you would have to show what you would buy and produce receipts) and the Government set aside an initiative asking volunteers to act as business mentors to come forward, centrally. This would save a lot of money. Its a very nice tidy sum for simply matching a participant to a mentor.

There is absolutely no need to require a person to sign off before they get the loan (some say this sin't the case in their area) and to wait so long for a change in payment. It doesn't take that long to swap someone from JSA to Training Allowance... and I have personally in the past moaned at JCP for not paying me, and sent the payment within an hour by Advice Confirms transfer. You have to produce a business plan with a mentor BEFORE getting the payments, so if you have been put forward to a mentor... they must know you are soon going to change on to NEA.

Long post sorry... does anyone know what happen if you were to terminate the NEA scheme? Such as decided you would rather sign back on due to change in the market etc.

seeke

@WPN I imagine that you can't really terminate it! I'm guessing that you would have to see it through, then attempt to sign-on again after six months. But whilst I think it's healthy (and wise) to be a bit cynical where government is concerned, I must confess, I don't understand why you seem to have such a downer on this scheme. Obviously, it will be used to massage the unemployment figures. But ALL governments try to do that! The loan is clearly not the best deal ever. But nobody's putting a gun to head to take the loan. I'll try to shop around for a better deal. But I doubt I'll get one!

Basically, this scheme offers a chance to get a business off the ground. If your business doesn't make much money,the government will support you with Housing Benefit,Council Tax Benefit,Working Tax Credit,whatever. The worst that can happen is you eventually end up back on JSA. Maybe I lack imagination,but apart from the loan component,and possibly the short duration...6 months, I cannot see how the scheme could be improved without making it almost...cushy. The mentoring is almost bound to be patchy. It is a government scheme. It's almost duty-bound not to function perfectly. There are very few things that government is actually good at. So within the context of an imperfect world, this imperfect scheme seems imperfectly good to me.

Mind you, I'll likely be moaning about some ridiculous cockup that's rendered me starving and homeless before I'm through. Watch this space.

moneysavingkitten

It's really good to see this thread. I have been struggling to get my head around NEA allowance for a couple of months.

I was wondering how people were getting on with housing benefit? I understand that the NEA payment is disregarded for the purposes of housing benefit, but not one seems to be able to tell me if housing benefit can be paid if you earn money on top of your NEA payment.

I went to the council offices and asked them, they told me that there was an allowance, so you could earn up to £65, then they would start taking it into account. However my rent is more than £65 a week, so this would leave me with a £20 - £30 shortfall, which means I could pay my rent and bills but I couldn't afford to eat. So I asked them if I would be entitled to a part payment to make up the difference but they were very evasive. They told me that on top of the £65 there were things called 'premiums', which could change the allowance you were entitled to. But they wouldn't tell me how much they were or what they were for.

I asked them how I was supposed to work out if I could live or not if they couldn't tell me what the thresholds for these benefits were and they told me I could bring in proof on my earnings every week and they could review housing benefit on a weekly basis (yay! that sounds like so much fun! )

Do you any of you have an experience of this? It seems to me there is a gap you can fall through in the middle, if you earn a little money, but not enough to cover your rent.

I went to the CAB and asked them the same questions. They were not overly helpful, they seemed to think I was cheeky for asking the question about housing benefit. They told me that I should apply for the loan to cover any shortfall in housing benefit, then quoted me a load of stuff from the DirectGov website. I am really not comfortable taking out a loan. I don't need to buy anything more to start my business and I have spent the last few years getting out of debt!

I am also a bit unclear what happens if you say earn a few thousand pounds in the first month, but nothing in the second month. What happens to housing benefit then? Do you claim because you are not earning, or do you pay your rent with the money you earn in month 1?

Can anyone confirm that they are actually claiming working tax credits and NEA together? I haven't been told anything about this I was aware you could claim working tax credit as a self employed person, but I didn't know you could claim them together. I was even wondering if you business did make a profit, so you couldn't claim housing benefit, after 26 weeks, I think you would actually be better of claiming tax credits and going it alone than claiming NEA! But if you can claim them together that changes things I guess.

Also the money that you make, surely you need to spend some of this investing back in your business, so you can do marketing etc. But if you have to use this money to pay rent, then you can't invest anything in the business unless to make loads of money?

I am feeling a bit mislead by the scheme at the moment. At the beginning they told me it would be 26 weeks of full JSA and housing benefit, which I thought gives you a fair chance, because you have the opportunity to save some money for after the 26 weeks is up and when you are on your own. Then about a month ago they told me after 13 weeks the money drops to £33. So I took that on the chin and thought, well after 3 months I should be making some money to replace that, so that's okay.

Then this week they told me to go to the council and check I was still entitled to housing benefit which was a bit of a shock! I have had my business plan approved, and I am due to change over to NEA on Tuesday next week, so it really doesn't give me a lot of time to get my head straight.

I know they probably didn't intentionally mislead me about what would happen to benefits, they probably didn't have the information themselves. But how can I sign up to something if no one can help me work out if I can afford to live? I even put housing benefit payments in my forecasts in my business plan and no one pulled me on it. I am desperate to start my own business, but not that the risk of becoming homeless or starving!

I really wish I could get my head round all this. Any advice gratefully received.

BigAunty

Are you bods aware of how the self employed will be treated with regard to change from the array of benefits mentioned (CT, housing benefit and tax credits) under the move to Universal Credits?

Currently, a self employed person with low profits can get a slew of means tested benefits based on their actual low income.

Under UC, the discussion paper mentions that they will be treated as if they have earned the National Minimum Wage (even if they haven't). So this has the potential to greatly reduce many people's state support while they have start up businesses.

I suppose the benefit of this JC enterprise scheme is that a person has to have produced a business plan, considered how to market their service/goods, their competitors, the risks and so on rather than those that sign off without any research thinking 'should my business be crap, it doesn't matter as my rent and CT will get paid'