Financial Eligibility – Income Related ESA
Income-related ESA is a means-tested benefit. This means your needs (and those of your partner, if you have one) are compared with the money you have, such as your income and savings. Income-related ESA is worked out from this. It can be paid on its own (if you are not entitled to contributory ESA) or as a top-up to contributory ESA (if you are). Income-related ESA can include amounts to help towards mortgage interest payments and some other housing costs.
To be entitled to income-related ESA you must satisfy all the following conditions.
- You must have no income, or your income is below the applicable amount (see this AgeUK factsheet regarding income eligibility)
- You must not have more than £16,000 in savings or capital
- You must not be entitled to pension credit
- If you are a member of a couple, your partner must not be working for more than 24 hours a week
- You must not be in full-time education
Financial Eligibility – Contributory ESA
To qualify for ESA on the basis of you NI contribution you must pass the first condition and the second condition. Unless you qualify for the ‘support group’ (see section 3 below), payment of contributory ESA will be limited to 12 months.
What National Insurance Contributions count?
Only Class 1 and Class 2 national insurance contributions counts towards contributory ESA.
Class 1 Contributions: If you earn above a certain amount a week you will be treated as having paid Class 1 Contributions.
Class 2 Contributions: these are flat rate contributions paid by self-employed people.
How long is a year? A tax year runs from 6 April to 5 April the following year.
What is the relevant benefit year? The relevant benefit year is the year that includes the start of your ‘period of limited capability for work’.
Can I pay towards my Class 1 and Class 2 contributions? You cannot pay towards Class 1 contributions. You can pay towards Class 2 contributions if you are self employed.
You need to have paid enough national insurance contributions in certain tax years to be entitled to contributory ESA. You must have paid enough Class 1 or 2 national insurance contributions in at least one of the last two complete tax years before the year in which you claim. There are two conditions.
You will treated as having paid enough Class 1 or 2 Contributions (please see below for descriptions of class 1 or 2 contributions) if you have earned above a certain amount (depending on the year) for 26 weeks of that year.
- 2013/14: between April 2013 and April 2014, you will need to have earned at least £109 per week for 26 weeks
- 2014/15: between April 2014 and April 2015, you will need to have earned at least £111 per week for 26 weeks
- 2015/16: between April 2015 and April 2016 you will need to have earned at least £112 per week for 26 weeks.
Example of Mr Smith:
Mr Smith became ill in July 2015. The relevant benefit year for Mr Smith is 2015/16. To find out if he is eligible for contributory ESA, Mr Smith needs to find out how many Class 1 and Class 2 contributions he paid in the two tax years before he became ill (April 2013- April 2014 and April 2014-April 2015). He needs to have paid Class 1 or Class 2 contributions for 26 weeks in either 2013/2014 or 2015/2016. If he has done this he will meet the first condition.
The second condition is that you need to have paid national contributions on earnings 50 times the lower earnings limit in BOTH of the tax years before the start of the relevant benefit year.
Example of Mr Smith
Between April 2013 and April 2014 Mr Smith needs to have earned £109 x 50. (£5450)
Between April 2014 and April 2015 Mr Smith needs to have earned £111 x 50. (£5550)
In both of these years Mr Smith was paying either class 1 or class 2 National Insurance contributions on these earnings.
If you are unsure of how many NI contributions you have made, you can ask HMRC using one of the following methods:
1. Using an online form:
2. Calling them: 0300 200 3502
3. Writing to them:
National Insurance contributions and Employers Office
HM Revenue and Customs
You will need to ask them how many Class 1 and Class 2 contributions you made in the two tax years before your relevant benefit year.