With new coronavirus restrictions in place and many UK workers returning to home offices, the Treasury recently announced that there would be no Autumn Budget: “Now is not the right time to outline long-term plans – people want to see us focused on the here and now.”
Instead, on Thursday 24 September, the Chancellor announced a new set of measures designed to protect the economy through a potentially locked-down winter.
Unveiling his winter economy plan, setting out the next phase of the economic response to the Covid-19 pandemic, the Chancellor acknowledged that the virus will be a fact of life ‘for at least the next six months.’
Here are the main points announced in Rishi Sunak’s latest speech.
A new Job Support Scheme
Back in March, as the scale of the pandemic became clear, the Chancellor announced the Coronavirus Job Retention Scheme, more commonly referred to as the ‘furlough scheme’. It aimed to mitigate the risk of redundancies as lockdown forced businesses to shut.
The furlough scheme initially paid 80% of wages for those workers unable to work, up to a maximum of £2,500 per month. As the economy reopened, employers had to pay 10% of the wages of those on furlough and workers could return part-time, with the government making up the hours not worked.
The furlough scheme – due to end in October – has cost the government billions of pounds but pressure was mounting on the Chancellor to explain what, if anything, would replace it.
The newly announced Job Support Scheme will see the government and employers jointly covering the cost of those forced to work fewer hours. Under the scheme, businesses will have the option of keeping employees in a job on shorter hours, rather than making them redundant.
The Chancellor confirmed that the scheme will only protect ‘viable’ jobs. In practice, this means an employee will have to work a minimum of 33% of their normal hours to be eligible for the scheme.
For the hours not worked, the government and employer will each pay one-third of the employee’s wages. Employees working 33% of their hours will therefore receive at least 77% of their overall pay.
Source: The Guardian
The scheme will begin on 1 November 2020 and last for six months.
All small and medium-sized firms are eligible, but large firms are only eligible if their turnover has fallen in the pandemic.
As a business owner, you can also use the Job Support Scheme in conjunction with the Job Retention Bonus that the Chancellor announced in his Summer Statement.
CBI director-general Carolyn Fairbairn says: “These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter. It is right to target help on jobs with a future but can only be part-time while demand remains flat.”
An extension to the Self-Employed Income Support Scheme
The Chancellor also revealed that he would extend the Self-Employed Income Support Scheme to 30 April 2021, although at a much-reduced rate.
The extension will support viable traders who are facing reduced demand over the winter months, covering 20% of average monthly trading profits through a government grant.
More flexibility with government loan schemes
The government announced that the Chancellor’s ‘Pay as you Grow Scheme’ will grant businesses greater flexibility to repay Bounce Back loans.
More than one million businesses have used the scheme to take state-backed loans worth up to £50,000. The main changes are:
- Increased time to pay back new and existing loans – increased from six to ten years
- Payment holidays and interest-free periods – Businesses can take three interest-only periods, each lasting a maximum of six months. You can also take one payment holiday, again for a period of six months.
- Bounce Back Loan Scheme extension – the original deadline for applying for a bounce back loan was 4 November 2020. Sunak announced an extension to 31 November 2020.
Lenders who have been enabled to offer the Coronavirus Business Interruption Loan Scheme will also offer borrowers more time to make their repayments where needed.
If you are a business owner and you deferred VAT this year, you will no longer have to pay a lump sum at the end of March 2021.
Instead, you will have the choice to split it into smaller, interest-free payments over 11 months. This will help up to half a million businesses.
The Chancellor also announced that self-assessed income taxpayers who need extra help can extend their outstanding tax bill over 12 months from January 2021.
VAT reduction extended for the hospitality sector
In his Summer Statement, the Chancellor reduced the VAT rate applicable to hospitality businesses from 20% to 5%.
In his address, Sunak announced that he will extend this VAT cut to the end of March 2021. Sunak says that this will continue to support more than 150,000 businesses and protect 2.4 million jobs.
Get in touch
If you’d like to discuss the impact of these measures on you or your business, get in touch.
The coronavirus pandemic has hit many families hard but speaking to a financial advisor could help. Refocusing or adjusting a financial plan could ensure you and your loved ones are still able to meet your long-term financial goals. Please email firstname.lastname@example.org or call 020 8891 0711.