When navigating the world of benefits and allowances, it’s important to understand what each term means, who qualifies, and how to claim. In this article, we’ll explore two distinct financial support mechanisms in the UK: Employment Allowance and Employment and Support Allowance (ESA).
What is Employment Allowance?
Employment Allowance is a scheme designed to help businesses and charities reduce their employer National Insurance contributions (NICs). Eligible employers can reduce their NICs bill by up to £5,000 per tax year. This support aims to ease financial pressure on small businesses, helping them grow and sustain employment.
What is Employment Allowance Eligibility?
To claim Employment Allowance, you must meet specific criteria. You’re eligible if:
- You are a business or charity (including community amateur sports clubs) that pays employer NICs.
- Your total employer NICs bill was below £100,000 in the previous tax year.
You cannot claim if:
- You’re the only employee in your company and you’re also the director.
- You employ someone for domestic work (e.g., a nanny) unless they are a care or support worker.
What is Employment and Support Allowance (ESA)?
Employment and Support Allowance is a benefit for individuals who cannot work due to illness or disability. ESA offers financial support to those unable to earn an income and provides personalized help to prepare for future employment if you’re able.
How Much is the Employment and Support Allowance?
The amount you receive depends on:
- The type of ESA: There are two main types – contributory (now called “new style” ESA) and income-related ESA.
- Assessment period: During the initial 13-week phase, you may receive a lower rate, which increases after assessment.
As of 2024:
- Weekly rates typically range between £77.00 and £117.60, depending on your circumstances and eligibility.
Who Can Claim Employment and Support Allowance?
You may be eligible for ESA if:
- You are under the State Pension age.
- You have a health condition or disability affecting your ability to work.
- You’ve paid sufficient National Insurance contributions (for new style ESA) or have limited income and savings (for income-related ESA).
How Do You Claim Employment and Support Allowance?
To claim ESA:
- Contact your local Jobcentre Plus or apply online through the government’s website.
- Provide details of your medical condition, work history, and financial circumstances.
- Undergo a Work Capability Assessment to determine your eligibility and level of need.
Can I Claim an Employment Allowance?
Whether you can claim depends on the nature of your business or organization and your NIC’s liability. Use the government’s online tool or consult your accountant to check eligibility.
Is Employment Support Allowance Taxable?
Yes, ESA is taxable. However, whether you pay tax depends on your overall income level. If your total earnings (including ESA) fall below the personal allowance threshold, you won’t owe tax.
What is the New Style Employment and Support Allowance?
The “new style” ESA is a contributory benefit available to individuals who have paid enough National Insurance contributions. It’s not means-tested, meaning your income or savings won’t affect your eligibility. However, you cannot receive a new style ESA simultaneously with Universal Credit, though it can complement other benefits in some cases.
Conclusion
Both Employment Allowance and Employment and Support Allowance are vital resources but serve different purposes. Employment Allowance supports businesses by reducing NIC liabilities, while ESA provides financial relief to individuals unable to work due to health conditions. Understanding the differences and eligibility criteria ensures you can access the support you’re entitled to.
