7 changes Rishi Sunak made in Winter Economy Plan and how it affects your finances
CHANCELLOR Rishi Sunak today announced a raft of new support for jobs and the economy as coronavirus cases rise.
The measures set out today will help workers, the self-employed, and businesses to support the economy into the winter.
It includes a follow up to the furlough scheme, cheaper holidays and a delay to tax bills for the self-employed.
Here's all the financial support you need to know about.
1. The Job Support Scheme to replace furlough
The Coronavirus Jobs Retention Scheme – or furlough scheme – will be replaced by the Job Support Scheme.
The Chancellor confirmed that furlough will end on October 31 and will not be extended.
The Job Support Scheme will help businesses keep staff employed throughout the winter months when demand may drop if coronavirus restrictions are tightened.
Employees must work at least a third of their normal hours, and the government and the employer will top up their wages.
What is Rishi Sunak’s Job Support Scheme, who is eligible and how do I apply?
- To be eligible, employees must be working at least a third of their contracted hours and be paid for those hours in full by their employer.
- For the two thirds of the other hours not worked, the Government will pay a third – so 22 per cent of their overall wages.
- The employer will have to pay the other third of it. It means with the third they are already paying, they will have to fork out 55 per cent of the total wages.
- The scheme will start on November 1 – the day after the other furlough scheme ends.
- It's open to all small and medium sized businesses, even if they didn't use the furlough scheme beforehand.
- The Job Support Scheme will only help those on the PAYE pay roll. Self-employed workers have been given more time to pay their tax bill and extra grant help.
- It's likely that employees won't have to apply – and the employers will do the work for them.
- Employers were previously able to claim back the wages from the HMRC portal.
The Government will pay just under a third (22 per cent) and the employers will have to pay the other third to qualify.
The Government's chunk of the support will be capped at £697.92 per month, and it means workers who are currently working a third of their normal hours will get up to 77 per cent of their normal wages.
It will last for six months, until April 2021, and open to all small and medium-sized businesses.
Employers can still claim the £1,000 jobs retention bonus in January 2021 if they use the scheme.
2. Cheaper UK holidays and meals out extended
VAT (value added tax) was slashed from 20% to 5% for the hospitality industry as part of Mr Sunak’s mini-Budget on July 8.
The tax break was going to last until January 21, 2021 but today the Chancellor extended it until March 31 2021.
He said the move will protect 2.4million jobs in the hospitality and leisure industry.
VAT is a tax paid by businesses to HMRC on the items or services they sell, with the savings typically passed on to customers in the price they pay for goods and services.
Full list of businesses where VAT will be cut
THE VAT rate will be slashed for the hospitality and tourism industries in order to help them bounce back from the coronavirus crisis.
- Restaurants, cafes and pubs
- Hotels, inns, boarding houses and similar establishments
- Holiday and caravan parks and other holiday accommodation businesses charging fees for tent pitches or camping facilities
- Amusement parks
- Similar cultural events and facilities
Firms aren't required by law to pass on the reduction to consumers, but if they do it means cuts of 12.5% on the end price people pay.
In terms of holidays, the saving could cut £300 off a one-week family staycation.
When the VAT cut was first announced, the Treasury said the reduction is expected to save households around £160 a year on average.
3. Extra time to pay back bounce back loans
Small businesses have been able to borrow money through the bounce back loan scheme to help them through the pandemic.
And they will now have longer to pay back the money, which adds up to £38billion in total.
Mr Sunak said the flexible repayment system, called "pay as you grow" would extend the term of the loan from six to ten year, cutting the monthly repayments by nearly half.
What is a bounce back loan?
BOUNCE back loans are for small companies and sole traders whose businesses have been hit by coronavirus.
Under the scheme, which launched on May 4 and is available until November 4, firms can get loans worth up to 25% of their turnover, up to a maximum of £50,000.
These loans are 100% guaranteed by the government, and it will cover the interest on the loans for the first 12 months.
Businesses are then able to pay back the remaining balance over the next five years at a 2.5% interest rate.
The scheme has been described as a “lifeline” although experts have cautioned firms against rushing into debt.
You can’t apply for a bounce back loan and a coronavirus business interruption loan (CBIL).
The CBIL offers more money – between £50,001 and £5million – but is only 80% backed by the government, meaning it's riskier for banks administering payouts.
Businesses will also have the option of repaying only the interest of the state-backed loan and businesses that need it can take a break from repayments altogether for six months.
Mr Sunak said credit ratings of businesses won't be affected.
4. More grants for the self-employed
The self-employed have been able to get two instalments of cash since the pandemic hit and there will be more to follow.
The new self-employed grant will cover 20% of average monthly profits, up to a total of £1,875, spanning November to January next year.
An additional second grant will also be available for the self-employed to cover February 2021 to the end of April.
The government hasn't said how much this second grant will cover.
Coronavirus help for the self-employed
HERE’S a round-up of the main coronavirus government schemes for the self-employed:
- Grants of up to £7,500 under the Self-Employment Income Support Scheme
- Deferral of Self Assessment Income Tax and VAT payments
- Grants for businesses that pay little or no business rates
- Business Interruption Loan Scheme
- Bounce Back Loans
- Furlough pay of up to £2,500 for some company directors
The first grant covering March, April and May was worth up to 80% of three month's profit capped at £7,500 in total.
The second was worth up to 70% of profits over three months again – June, July, and August – worth up to £6,750 in total.
5. More time to pay self-assessment tax bills
The self-employed will also get more time to pay their tax bill.
The 31 January 2021 deadline for paying taxes through self assessment has been extended to January 2022, giving an extra 12 months to pay.
And those who have already deferred payments that were due in July to January 2020 will now have January 20222.
6. More time to pay VAT
Businesses who put paying their VAT bill on hold will get more time to pay.
Half a million businesses which chose to defer their payments will be able to pay them in smaller instalments instead of all at once.
The lump sum bill had been due at the end of March next year but instead there will now be the option to pay in 11 smaller interest-free payments through the next financial year which runs from April 2021 to April 2022.
7. Emergency businesses loans extended until the end of 2020
Businesses have been able to access loans to help them through the pandemic.
Mr Sunak said today that applications have been extended until the end of November for the following loans:
- Coronavirus Business Interruption Loan Scheme
- Coronavirus Large Business Interruption Loan Scheme
- Bounce Back Loan Scheme
- Future Fund
The business interruption loans schemes and Future Fund had been due to close at the end of this month and the bounce back loan scheme on 4 November.
The government said it will help over one million businesses.
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The Prime Minsiter announced fresh nationwide restriction to try and curb the soaring number of coronavirus cases.
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