Chancellor’s Summer Economic Budget

by | Jul 9, 2020 | Business, Personal Tax, VAT

A series of measures designed to revitalise the UK economy on the back of the COVID-19 crisis were outlined by the Chancellor of the Exchequer Rishi Sunak at the House of Commons on 8th July.

The second phase of the Governments economic response to the pandemic, comprised the following initiatives, many of which aim to address fears of a rise in the national unemployment rate.

The initiatives come as the UK faces the deepest global recession since records began with an economy that has contracted by 25% (having taken 18 years to grow by the same amount).

Furlough Bonus Scheme

By way of some compensation for the closure of the current furlough scheme in October, Sunak announced the new Jobs Retention Bonus, aimed at encouraging employers to retain furloughed staff.

Employers that retain previously furloughed staff until January 2021 will receive a one off £1,000 bonus per employee. Each employee must receive at least £520 per month on average, equivalent to the lower earnings limit of National Insurance.

Payments will be made after the bonus scheme finishes, from February 2021, and the specifics of the scheme will be announced by the end of July.

Kickstarter and apprenticeship initiatives

With the prospect of long-term unemployment set to have a significant impact for young people, a new ‘Kickstarter’ Scheme was announced.

The £2 billion funded programme is designed to create six-month work placements for those aged 16-24 who are on Universal Credit or those at risk of long-term unemployment.

The funding will cover the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance and minimum automatic enrolment pension contributions.

The ‘kickstarter’ grants will be worth around £6,500 per trainee and the application process will open next month, with the ‘kickstarters’ commencing employment from the autumn.

Additionally, from 1st August, for a six-month period, the Government will provide cash incentives for employers to hire new apprentices. For every new apprentice aged 16-24, employers will receive a £2,000 cash bonus, and for apprentices over 25, businesses will receive £1500.

Reduced VAT rates for hospitality and tourism

For one of the hardest hit sectors, hospitality and tourism, it was announced there would be rate cuts for the next 6 months. Beginning on 13th July, VAT will be reduced from 20% to 5% for certain areas.

Sectors set to benefit include food and non-alcoholic drinks from restaurants, pubs, bars, and cafés. Accommodation and admissions to attractions such as cinemas, theme parks and zoos are also covered. More guidance will be released by HMRC in the coming days.

The £4bn initiative aims to help the 150,000+ UK based hospitality businesses to recover as quickly as possible and mirrors approaches taken by other European countries such as Germany and Belgium.

’Eat Out to Help Out’ discount

One of the more creative measures introduced, was that of ‘Eat Out to Help Out’. Designed to encourage more people to dine out at local pubs, restaurants and cafes during August, the initiative offers a 50% discount for every diner, up to £10 a head, from Monday to Wednesday throughout August.

Businesses will need to register through a website which is due to open 13th July, and they will be able to claim the money back each week during August, with the funds becoming accessible within five working days.

Stamp Duty threshold raised

Applicable to England and Northern Ireland, the threshold for stamp duty will be increased to £500,000 until at least 31st March 2021. The threshold change will take immediate effect and it is hoped that the initiative will prevent 90% of movers over the next six months from paying any stamp duty.

Green Homes Grant (England only)

Available from September, a new £2 billion Green Homes Grant will allow homeowners and property landlords will be able to apply for vouchers to cover up to two-thirds of energy efficiency improvement costs up to £5,000. Up to £10,000 per household fully funded will be available for low-income households.