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Winter Economic Plan – What does it mean for you?

With the Autumn Budget scrapped, Chancellor Rishi Sunak has outlined the government’s Winter Economic Plan to the House of Commons. The highlight was the much anticipated Coronavirus Job Support Scheme, which will replace the furlough scheme at the beginning of November.

With the Autumn Budget scrapped, Chancellor Rishi Sunak has outlined the government’s Winter Economic Plan to the House of Commons. The highlight was the much anticipated Coronavirus Job Support Scheme, which will replace the furlough scheme at the beginning of November.

I seem to be saying this in every post recently, but times are uncertain. The measures we are seeing have never been considered before, making it very difficult to assess how effective they will be. It remains to be seen whether the latest raft of support will be enough to protect jobs, but they are likely to provide some relief to concerned business owners and their employees.

Rishi Sunak explained his latest approach. “We must learn to live with Covid and live without fear.” With that in mind, he explained the approach must “adapt and evolve” to meet the current requirements.  

This is by no means a comprehensive guide of all the measures and I’m sure further details will be announced in the coming days. But, this should give you an overview of the most important points.

The Coronavirus Job Support Scheme was detailed in the House of Commons in Westminster.

In this post I will cover:

  • Coronavirus Job Support Scheme           
  • Self-employed
  • Cash flow for businesses
  • Tax deferrals
  • Hospitality and Tourism
  • Those still working

Coronavirus Job Support Scheme           

The Coronavirus Job Support Scheme will replace the current furlough scheme, which ends on October 31st.

The key point for those affected is you will receive at least 77% of your salary, provided you are deemed to be in a “viable job” and your company is eligible.

The Chancellor once again stated his fears that people are being kept in jobs that only exist because of the furlough scheme. For this reason, employees must work a minimum of 33% of their hours to be eligible.

For the remaining hours not worked the government and employer will pay 1/3 of the wages each. This means, someone working the minimum hours required will receive 77% of their salary. 55% of this will come from their employer and 22% will come from the government. The government’s contribution is capped at £697.92 a month.

The scheme is only to all Small and Medium Sized Enterprises (SMEs). Large businesses looking to take advantage of the scheme will have to prove that their business has been adversely affected by Covid-19. It is expected large firms that do use the scheme will not make dividend payments or similar for the duration of the scheme.

Firms using the scheme can also claim the £1,000 bonus for bringing furloughed staff back.

Despite these incentives, many are sceptical if the support goes far enough. While we may not see the mass redundancies originally predicted, there will still likely be many left without a job.

The government is aware of this. Rishi Sunak has said repeatedly throughout the crisis that he cannot protect every job or save every business. The hope is that the scheme will protect the as many as possible.

 

Chancellor Rishi Sunak examines papers. He outlined the Coronavirus Job Support Scheme in his statement
Chancellor Rishi Sunak outlined the Coronavirus Job Support Scheme in his statement

Help for the self-employed

The self-employed will benefit from similar measures to the Coronavirus Job Support Scheme.

“Throughout this crisis, we have ensured parity between employees and the self-employed. So to support self-employed trades through the winter I am extending the existing self-employed grant on similar terms and conditions as the new Jobs Support Scheme,” the Chancellor confirmed on Twitter.

This will be welcome news to many who are still seeing a significant reduction in their income. The support started at 80% and was then reduced to 70%. Now it will cover just 20% of their average monthly trading profits. If your income has virtually disappeared, 20% will hardly cover your costs.

Given the focus on “viable jobs,” those who have been excluded before will likely still not be eligible. This means around 3 million UK taxpayers will still be left with no support.

Cash flow for businesses

This applies more to businesses than individuals, so I won’t go into too much detail.

In short, the government is extending access to its 4 temporary loan schemes. Over a million businesses have taken advantage of to date.

These are: Bounce Back Loans, Coronavirus Business Interruption Loan Scheme, Coronavirus Large Business Interruption Loan Scheme and the Future Fund.

The Chancellor also introduced a “pay as you grow” scheme, meaning businesses can spread repayments of these loans over a longer period as they recover from the economic crisis and grow in size.

Tax deferrals

The tax measures applies to both businesses and those who complete Self-Assessment tax returns.

So far, businesses have deferred over £30 billion of VAT till the end of March. This means businesses would have been required to pay this bill, plus any VAT incurred over the next 6 months in one go.

Instead, businesses can spread these payments over the course of 11 months. There will be no interest on these payments.

Those completing Self-Assessment returns will have more time to pay taxes due in January 2021, following on from the deferral offered in July 2020. Those with self-assessment liabilities up to £30,000 will be able to use HMRC’s Time to Pay facility to create a plan to pay over 12 months. This means taxes due in July 2020 will not need to be paid in full until January 2022.

This is a big lifeline for the self-employed, who with a lack of support may be struggling to pay their tax bills.

Hospitality and Tourism

The hospitality and tourism industry has been particularly hard hit by the pandemic. As a result, they have, and will continue to, receive special treatment.

In the Summer Statement, Rishi Sunak announced a 75% VAT cut for businesses in this industry, from 20% to 5%.  This was due to end on January 13th. However, now they will still benefit from the 5% rate until March 31st 2021.

This should help businesses stay afloat, but could also benefit consumers. While you may not see an obvious reduction in prices, it will be less likely there will be price increases. This should mean you can enjoy trips away, meals and drinks out (providing you leave by 10pm!) without breaking the bank.

Those still working

For those in full time employment, nothing should change. If you’re working in an industry that’s struggling, your job may be safer due to the additional support measures.

Some have complained that their taxes are funding others to have an extended ‘holiday’. I encourage those to think again. These schemes are keeping your favourite coffee shop in business, your local pub open, and helping independent suppliers and stores keep afloat. We all benefit from greater employment and a healthier economy.

We all benefit from greater employment and a healthier economy.

It’s also worth noting, that a large proportion of those falling into the Coronavirus job support scheme are in industries where lower incomes are the norm. Taking home 80% (or 77% under the new scheme) of their salary is hardly a holiday. Many will be worried about how they will pay their rent, bills and put food on the table over the harsh winter months.

If you found this post interesting, please like it and share across social media or send it to your friends. I’d also love to hear your thoughts, so please leave a comment! Do you think these measures will work? Will you benefit from any of the schemes?

By The Twenty Percent

Hi I'm Katie and I use my blog to help young people take control of their personal finances.

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