After scrapping plans for a full-scale Autumn Budget announcement, Rishi Sunak instead shared details of his Winter Economy Plan on Thursday 24th September. Please read on for a summary of the key points and takeaways...
JOB SUPPORT SCHEME
The Chancellor confirmed that the furlough scheme is ending on 31October as originally planned and will be replaced by the Job Support Scheme for 6 months starting 1 November 2020.
The new Job Support Scheme is primarily targeted at small and medium sized businesses (large businesses will have to demonstrate that their turnover is lower due to difficulties from Covid-19).
The basics are:
An employee needs to work at least 33% of normal hours. The employer pays for these hours.
Of the remaining 67% of normal pay, the employer pays 33% and the government pays 33%.
The subsidies (from employer and government) towards pay for hours not worked are 33% of 67% each - which is equivalent to 22% of 100% each.
So, where an employee works 33% of normal hours, the employer funds 55% of normal pay and the government funds 22%. The employee will receive 77% of normal pay, and forego 23%.
If an employee works more than 33% of normal hours, the above figures change proportionately (see the examples at the end of this link).
The level of government subsidy is capped at £697.92 per month.
The scheme is open to businesses even if they didn’t previously use the furlough scheme.
Detailed guidance will be issued in due course.
SELF EMPLOYMENT INCOME SUPPORT SCHEME (SEISS)
This scheme is being extended for a further three months from 1 November 2020 to 31 January 2021.
The basics are:
To be eligible you have to have been eligible for the previous (second phase) of the SEISS grant.
The claimant must be actively trading but experiencing continuing reduced demand due to coronavirus.
The grant will be worth 20% of average monthly profits, up to a total of £1,875 (presumably £625 a month). Presumably the calculation is based on historic profits as previously.
A further phase may be announced to cover February, March and April 2021, depending on what happens in the next few months. It hasn’t been stated how this will be calculated.
TOURISM AND HOSPITALITY VAT
The current VAT reduction from 20% to 5% is being extended until the end of March 2021. Previously it was due to finish mid- January 2021.
VAT DEFERRAL AND THE NEW PAYMENT SCHEME
Businesses who deferred the VAT payment due for the quarter ended February/March/April 2020 and who are due to pay the deferred amount in March 2021 will be able to apply under the New Payment Scheme to pay the amount due by 11 interest free monthly instalments.
SELF-ASSESSMENT TAX DEFERRAL AND THE NEW PAYMENT SCHEME
The self-employed, and other self-assessment income tax payers, will be given more time to pay the tax due in January 2021.
Providing the amount due is up to £30,000, taxpayers will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months.
PAY AS YOU GROW
The Bounce Back Loan (BBS) and Coronavirus Business Interruption Loan Scheme (CBILS) were initially set with a payback period of six years. This is being extended to ten years.
This will cut monthly repayments…but at the end of the day it’s still a loan and needs repaying.