The Chancellor of the Exchequer, Rishi Sunak, announced his new winter economy plan on the 24th of September – This outlines all the financial support that will be available in the winter months for those affected by the COVID-19 pandemic (self-employed & businesses).
According to Which, the winter economy plan is defined as the broad name for the collection of schemes, initiatives and tax deferrals that the government has planned to help safeguard jobs over the next few months.
During his speech to the House of Commons, Mr Sunak emphasised that his plan aimed to balance protecting the economy and the health of UK citizens during these uncertain times. This winter economic plan of schemes and initiatives will stay in place for the next six months; unless there are further issues with COVID-19, which could cause the plan to change.
Since the beginning of the pandemic, the government has used the coronavirus jobs retention scheme (furlough system) to help pay 9.6 million peoples wages and support 2.6 million self-employed employees. The government has also helped businesses by providing loans, tax deferrals, business rate relief and grants – In the hope, this would save as many jobs as possible.
Now, the government have set out four main measures in the winter economy plan to help protect businesses and jobs due to the uncertain future we have ahead of us – These measures include:
- The New Job Support Scheme (JSS) and Extension to Self-Employed Income Support Scheme (SEISS)
- Extension to Deadline for COVID-19 Loan/Grant Schemes + Changes to the Terms of the Bounce Back Loans (BBLS) and Coronavirus Business Interruption Loans (CBILS)
- Reduction in VAT for Hospitality and Tourism Sectors Extension
- Payment Schemes Meaning Deferred VAT & Tax Can Be Paid Gradually (Instead of in a Lump Sum)
The Job Support Scheme
This is the new job support scheme set out in the winter economy plan, that will replace the furlough system on the 1st of November, it has two different parts – One for if businesses are still open but facing decreased demand (JSS Open) and the other is for if businesses are forced to close due to lockdown restrictions (JSS Closed).
In areas where businesses are allowed to remain open, support is needed to make up for the reduced demand in order to retain jobs. Staff will still have to work at least 20% of their hours and businesses should still pay the staff for these hours as normal, staff will also get 66.67% of their pay for the hours not worked.
The government will contribute 61.67% of the wages for hours not worked up to £1541.75 per month, with 5% being paid by the business (up to £125 a month). This ensures people who earn £3125 or less will receive a minimum of 73% of their wages, which is very close to 80% of wages provided by the furlough system.
Businesses that are legally required to close due to COVID restrictions/lockdowns set by any of the four national governments in the UK can access the JSS Closed. For every employee who can no longer work, they will receive 66.67% of their normal wages funded by the government, up to £2083.33 a month.
Self-Employed Income Support Scheme Extension
This extension announced in the winter economy plan will last up to April 2021 (six months), providing grants to self-employed workers in two lump sums through the SEISS extension. The first grant is for the three months after November 1st, paying 40% of monthly profits, up to £3750.
The second grant will cover the three months from February 1st until the scheme ends. However, the government has not released how much the second grant will cover yet, stating it will come after a review ‘in due course’.
Both the first and second grant will be subject to tax and national insurance contributions.
Extension to Business Loan Schemes + More Time To Pay
The four temporary business loans will be extended to allow for more applications (until 30th November); this includes – the bounce-back loans, the future fund, coronavirus large business interruption loans and coronavirus business interruption loans.
The chancellor has outlined in the winter economy plan that there will be a new ‘pay as you grow’ system, this allows your loans to be extended from six to ten years. This will make the monthly repayment almost halved, which will help many businesses in the future, once we’ve got back to ‘normal’.
Reduced VAT Extension for Hospitality & Tourism Sectors
On the 8th of July, it was announced that there would be a 15% reduction in VAT (from 20% to 5%) for certain sectors – hospitality, hotel and holiday accommodation and admissions to certain attractions. Originally, this reduction was meant to last until January 2021 but now it has been extended to March 2021.
This extension in the winter economy plan aims to help in supporting businesses in these sectors which have been very heavily hit by the pandemic. It will affect over 150,000 UK businesses and help to protect 2.4 million jobs. The reduction will apply to food & non-alcoholic drinks and to the supply of accommodation & attractions.
New Deferral Scheme for Income Tax and VAT Payments
Originally, there was a deferral of income tax and VAT payments until March 2021 and payments had to be paid in a lump sum. However, now businesses don’t need to repay these deferrals until June 2021 and can be paid in smaller instalments (over 11 months).
Although, if payments are deferred after January 2021, HMRC can apply interest to the amount owed. Businesses will be able to organise a time to pay the deferral, unlike the automatic system seen in 2020.
Any business that took advantage of the deferral on VAT can now use the new payment scheme, but they’ll have to opt-in when HRMC puts this process in place, in early 2021.
It is clear that the government’s main goal is to save as many jobs as possible over the winter period and to keep the economy going – Helping all businesses (small or large), employees and the self-employed by offering a wide range of COVID support measures for each.
These new measures add more flexibility to some of the previous measures and allow people to go back to work at reduced hours. If you or your business need any financial support during the pandemic, you should investigate and take advantage of the schemes set out in the winter economy plan.
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