Guide

What is Employment and Support Allowance (ESA) & how much do you get?

Learn what ‘Employment and Support Allowance’ is, and whether you could be eligible to claim it.

What is Employment and Support Allowance (ESA)?

What is ESA?

Employment and Support Allowance is a UK government-funded benefit for those who have a disability or illness that makes it difficult for them to work. You are eligible for ESA whether you’re employed, unemployed or self-employed.

If you’re freelance or self-employed in the UK it’s worth looking into ESA as it allows you to access a form of sick pay, considering you won’t receive financial support from an employer.

As a self-employed person, you could be eligible for ESA whilst continuing to work if your illness or disability restricts or reduces your ability to work. You can continue to work whilst claiming ESA as long as you are doing permitted work, which includes working for less than 16 hours a week and earning less than £183.50 a week.

ESA eligibility criteria for the self-employed

You’ll need to fit the following:

  1. Your Statutory Sick Pay (SSP) has ended or you aren’t eligible for SSP
  2. You are under State Pension age
  3. You have a disability or a health condition that affects how much you can work
  4. You have paid enough National Insurance contributions in the last three years to access ESA
  5. You have a ‘fit note’ from your doctor (also known as a ‘sick note’) to support your application

Let’s explore the 2 types of ESA

There are two different types of ESA depending on your circumstances: New Style ESA (also known as contribution-based ESA) and income-related ESA (an older style of ESA).

1. New style ESA (or contribution-based ESA)

If you have paid two years’ worth of National Insurance contributions over the last three tax years, you may be eligible for New Style ESA whether you are employed or self-employed.

To be eligible, you’ll need to demonstrate that you’re unable to work because of your injury, illness or disability during the assessment process, for instance providing a fit note from your doctor confirming you’re unable to work. With contribution-based New Style ESA, your savings won’t be a part of the eligibility assessment, and if you have a partner their income won’t be factored into the decision.

You can’t claim New Style ESA while claiming Statutory Sick Pay (SSP). You can apply for New Style ESA up to three months before your SSP ends and you’ll start receiving it once your SSP ends.

Find out if you’re eligible for New Style ESA.

2. Income-related

Income-related ESA is an older style ESA that is being replaced with Universal Credit. This type of ESA considers your savings, and the income of yourself and your partner if you have one.

You cannot apply for income-related ESA anymore. If you are already receiving it your payments will continue until the end of your claim.

How much is ESA?

The amount of financial support you’ll receive through ESA will depend on your circumstances and how much your illness or disability affects your ability to work. ESA payments are made every two weeks.

ESA rates

Assessment phase

During the assessment phase someone will determine whether you’re eligible for ESA and the appropriate support group you’ll be placed in. This usually takes up to 13 weeks. How much ESA you receive a week depends on your age. During the assessment period you’ll receive a baseline assessment rate of:

  • up to £71.70 a week if you’re aged under 25
  • up to £90.50 a week if you’re aged 25 or over

If your application takes longer than 13 weeks you’ll continue to receive the assessment base rate until a decision is made. If you’re then approved for ESA you’ll receive backdated payments for any of the money you’re owed.

Main phase

If you’ve been approved to receive ESA, you’ll be either placed in a work-related activity group or a support group.

You’ll be put in the work-related group if you can’t work right now due to your illness or disability, but you can take some small steps towards employment like writing a CV. It’s expected that you’ll be able to return to work within a year.

Those in a work-related group will need to attend regular sessions with a work coach to help them prepare to re-enter the workforce. In this group, your ESA will last 365 days.

You’ll be put into the support group if you can’t work now and you’re not expected to be able to prepare for work in the future. This may be because your disability or illness is so severe that it significantly disrupts your ability to work, or you have a terminal illness where doctors predict you have less than twelve months to live.

There is no time limit to your ESA claim, and how much you have in savings whilst in the support group will not affect the amount of ESA you receive.

During the main phase of your ESA claim you’ll receive:

  • up to £90.50 a week in the work-related activity group
  • up to £138.20 a week in the support group

How to claim ESA

Before applying for ESA make sure you have the following to hand:

  1. your National Insurance number
  2. your bank or building society account number and sort code
  3. your doctor’s name, address and phone number
  4. a fit note (once you’ve been unable to work for seven days in a row)
  5. details of your income (if you’re working)
  6. the date your Statutory Sick Pay (SSP) ends (if you’re entitled to SSP)

ESA and Universal Credit for the self-employed

You can claim both the new style ESA and Universal Credit simultaneously, but be aware that your Universal Credit amount will be reduced by the amount of ESA you get.

ESA FAQs for the self-employed

How much ESA will I receive if I also get PIP?

Personal Independence Payment (PIP) is a separate support allowance to ESA and will not affect the amount you receive.

Is ESA taxable?

ESA is tax free.

What happens if I am put in the support group for ESA?

This means that you can’t work and are not expected to work in the future. This group is for people with severe health conditions and disabilities that substantially affect their ability to work. You won’t need to complete any additional tasks whilst in this group to continue to receive your ESA payments, unlike the work-related groups who need to attend sessions with their work coach.

Is ESA means tested?

No. The only ESA that is means tested is the income-related ESA.

How to protect yourself in times of sickness when you’re self-employed

Being prepared for future uncertainties, such as illnesses, can help to make sure your business is robust. Xero’s accounting software for sole traders and the self-employed makes it easier to stay on top of your business’ finances and plan ahead.

Cash flow forecasting helps you to foresee any cash flow difficulties, plan for them, and give your business the best chance of maintaining healthy finances, even in times of sickness. Learn more on our cash flow support hub.

Disclaimer

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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