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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.

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  UPDATED        

The Coronavirus Job Support Scheme, which was due to replace the current furlough scheme, has been scrapped.

Instead, the furlough scheme has been extended until March, as England goes into a second lockdown. This means employees will receive 80 percent of their salary for any hours not worked. You can work part time on furlough.

You don’t need to have been furloughed previously to take part, nor do employers have to have used the scheme before. Employees just need to have been on the PAYE payroll by 30 October.

This is available for all four nations, not just those in lockdown. Employers can also rehire those they have made redundant and furlough them again, providing they were on the payroll on 23 September 2020.

What’s changed

Effectively nothing now.

Firms using the scheme will miss out on the £1,000 bonus for bringing furloughed staff back though. This could be a blow for small businesses who had banked on getting that bonus.

The payouts will not be made in February as planned. Instead, the government has said it will “redeploy a retention incentive at the appropriate time.” What this means, however, remains to be seen.

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 outlined the Coronavirus Job Support Scheme in his statement

Help for the self-employed UPDATED

The self-employed will also benefit from the extended furlough scheme.

Rishi Sunak has matched the support for the self-employed to 80 percent of their average income. The maximum grant has therefore increased to £7,500.

Describing sole traders as the “dynamic entrepreneurial heart” of the UK economy, the Chancellor said: “This is our plan: a plan for jobs, for businesses, for the regions, for the economy, for the country – a plan to support the British people.”

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 UPDATED

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

But, the main change is the government extending the grant system for businesses in any tier. It doesn’t matter if they are forced to close by law or not..

They will be eligible for cash grants of up to £2,100 a month. This will primarily benefit the hospitality, accommodation and leisure sector. These will be retrospective, with businesses in any area that has been under enhanced rules able to backdate claims to August.

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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