Chancellor of the Exchequer Rishi Sunak gave his Summer Economic Update to the House of Commons on 8th July, outlining a string of measures designed to stimulate and revitalise the UK economy following the COVID-19 crisis.
The Chancellor devised a plan aimed at giving businesses “the confidence to retain and hire” in the months ahead.
Amid fears about a rise in the national unemployment rate, Sunak outlined the following schemes as the Government enters the second phase of its economic response:
Furlough scheme will end in October
Mr Sunak reiterated his intentions to close the Coronavirus Job Retention Scheme “flexibly and gradually” by October, citing that furlough is “in no-one’s long term interest”.
Jobs Retention Bonus Scheme launched
To augment the closure of the Job Retention Scheme, a new Jobs Retention Bonus will be introduced aimed at employers nationwide.
Employers retaining 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.
Kickstart Scheme targets new jobs for those aged 16-24
To combat the prospect of long-term unemployment in young people, the Chancellor has also announced the creation of a new Kickstart Scheme.
The new Kickstart Scheme is designed to fund six-month quality 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. £2 billion has been set aside for the scheme.
Apprenticeship incentives for employers (England only)
For six months starting from 1st August, the Government will also provide cash incentives for employers in England to hire new apprentices. For every new apprentice aged 16-24, employers will receive a £2,000 cash bonus, and £1,500 for apprentices aged 25 and above.
These new incentives are in addition to the existing £1,000 payment which is already provided for new 16-18-year-old apprentices and certain other apprentices aged over 25.
VAT cut for hospitality and tourism sectors
The UK’s hospitality and tourism sectors have been some of the hardest hit throughout the coronavirus lockdown. Some 1.4 million workers in the hospitality sector have been furloughed – the biggest number in the scheme per industry.
The Chancellor confirmed two key measures to try and stimulate demand in both sectors. First and foremost, the rate of VAT will be cut for most tourism and hospitality-related activities from 20% to 5% until 12th January 2021. This £4bn catalyst is designed to help the nation’s 150,000+ hospitality businesses to rebound as quickly as possible.
’Eat Out to Help Out’ discount
Mr Sunak said within his statement that it was important to “be creative” with his economic measures. The ‘Eat Out to Help Out’ discount is a unique approach, designed to encourage more people to dine out at local pubs, restaurants and cafes during August.
Next month, all meals eaten in participating establishments between Monday-Wednesday will be discounted by 50%, up to a maximum of £10 per head for both adults and children.
Businesses will need to register and can do so through a website which opens on Monday, 13th July.
Each week in August, businesses can claim the money back, with the funds in their bank account within five working days.
Customers do not need to do anything to claim their discount as this will be automatically applied to the bill, so long as the venue has signed up to the Government's scheme.
Stamp Duty threshold raised (England and Northern Ireland only)
Prior to the Summer Economic Update, all property transactions above £125,000 incurred at least 2% stamp duty. The Chancellor revealed his decision to increase this threshold to £500,000 until 31st March 2021, taking effect immediately.
During his announcement, Mr Sunak said this would ensure 90% of movers in the next six months will not pay a penny in stamp duty.
Green Homes Grant (England only)
The Chancellor also announced a new £2bn Green Homes Grant, which will be available from September. Both 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.
Mr Sunak anticipates this scheme creating up to 140,000 local jobs in communities, as part of the Government’s commitment to a “green recovery”. This in turn could lead to more work for tradespeople and many new businesses opening to address the demand from homeowners looking to save up to £300 per year in energy savings.
The Chancellor closed his update by saying that this crucial second phase after the peak of the COVID-19 pandemic is designed to “find the new balance between safety and normality”.
Temporary cuts to Land and Buildings Transaction Tax (Scotland only)
The Scottish Government has announced a temporary cut to the Land and Buildings Transaction Tax (LBTT) in a bid to stimulate the nation’s housing market.
Finance Secretary Kate Forbes confirmed the changes would not be enforced immediately due to “administrative reasons”, with the changes scheduled to start from Wednesday 15th July until 31st March 2021.
Date published 8 Jul 2020 | Last updated 15 Jul 2020This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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