HOW THE CHANCELLOR'S UPDATE MAY AFFECT YOU

ON July 8 the Chancellor introduced a three-point plan to support jobs in the wake of the current Covid-19 crisis when he delivered his Summer Economic Update to Parliament. He also announced a couple of other tax and VAT temporary changes.  

Furlough Update
Changes to the Coronavirus Job Retention Scheme (CJRS) on July 1 saw flexible furloughing introduced, so employees will no longer have to be furloughed for a minimum of three weeks. Employers will be able to allow employees to work some of the week and be furloughed for the rest.

The CJRS is due to close on October 31. From August 1 the level of grant will be reduced each month. From August the employer will need to pay employer NIC and pension contributions for the time the employee is furloughed. During August the government will continue to pay 80 % of wages up to a maximum of £2,500.00 per month. From September, the government will pay 70 % of wages up to £2,187.50 per month and from October 60 % up to a maximum of £1,875.00 per month. During these months, the employer will need to top up the employees’ wages to ensure they continue to receive 80 % of their furloughed wages up to the £2,500.00 cap. 

Job Retention Bonus
The CJRS will be followed by a Job Retention Bonus, which will be introduced to help firms keep furloughed workers in employment. This will see employers receiving a one off £1,000.00 payment for each furloughed worker who is still employed as of 31 January. To qualify for the payment employees must earn above £520.00 per month between October 2020 and January 2021.  

Kickstart Scheme
This will aim to create six-month work placements for young people aged between 16-24 who are claiming Universal Credit. Funding for each placement will cover 100 % of the National Minimum Wage for 25 hours a week, plus employer NIC and pension contributions. 

Government support-finding tool
The UK Government has launched an online platform to help businesses assess the financial support that may be available to them during the current Covid-19 crisis.  The tool will guide businesses through a range of loans, tax reliefs and grants, all designed to assist businesses through the extremely difficult economic effects of the current pandemic.  The tool will ask businesses to complete a short questionnaire regarding location, number of employees and turnover and then directs them to a list of financial support packages that they may be eligible for.  

VAT cut
In order to support the UK’s tourism and hospitality industry, the Chancellor announced a cut in the rate of VAT from 20% to 5%. This applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars and cafés, as well as supplies of accommodation, plus admission to attractions, including theme parks and zoos. This temporary VAT cut will commence from July 15, 2020 until January 12, 2021.

Stamp Duty Cut
The Chancellor also outlined a temporary cut in Stamp Duty Land Tax (SDLT) in order to boost the housing market in the UK. The government will temporarily increase the nil rate band of residential (SDLT) from £125,000.00 to £500,000.00 from July 8, 2020 until March 31, 2021. This Stamp Duty cut only applies to purchases of a main home.

If you need clarification on any of the above points, please don't hesitate to get in contact with us. We'll be happy to help.