Chancellor announces the Government’s Winter Economy Plan

On Thursday 24 September 2020, Chancellor Rishi Sunak delivered the Government’s Winter Economy Plan. Here is our summary of the key points:

Emergency jobs scheme

The job support scheme will replace the furlough scheme (which will come to an end on 31 October 2020) and will see workers receive three quarters of their usual salaries for six months. The objective is to avoid mass job cuts as the Government introduce new measures to tackle a rise in COVID-19 cases. Through the scheme, employers will continue to pay the salaries based on the reduced number of hours their employees work with the Government subsidising hours not worked which equates to one third of the equivalent salary.

The Government will continue to support millions of self-employed individuals by extending the Self Employment Income Support Scheme Grant. The initial lump sum will cover three months’ worth of profits for the period from November 2020 through to 31 January 2021. This is equivalent to 20% of average monthly profits, up to a total of £1,875.

VAT cuts to be extended for hospitality and tourism sector

The Chancellor has announced the extension of the temporary reduction of VAT rates in the hospitality and tourism sectors meaning the reduction in VAT rates from 20% to 5% will remain in place until 31 March 2021. This was initially planned until 13 January 2021 and this measure will help to protect approximately 2.4 million jobs during the winter months.

Tax reductions and deferrals

Up to half a million business who deferred their VAT bills will be given the option to pay back in eleven interest-free monthly instalments via the New Payment Scheme rather than paying a lump sum in full at the end of March 2021.

Self-assessment taxpayers with bills of up to £30,000 will benefit from a separate additional 12-month extension from HMRC by using  the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022. For those with tax to pay of over £30,000, arrangements will need to be put in place in consultation with HMRC. Action is required by the taxpayer in either case.

Greater flexibility for business loans

The Government have announced a new Pay as You Grow flexible repayment system that will impact over a million businesses who took out a Bounce Back Loan. The length of the loan will be extended from six years to ten which will reduce monthly repayments by nearly half. Interest-only periods and payment holidays will also be available to businesses in an effort to protect jobs as business recover from the pandemic. Additionally, the Chancellor has also announced the extension for applications for Coronavirus loan schemes until the end of November.

For full details of the Winter Economy Plan can be found here.