Due to the rise of COVID cases in the UK, Chancellor Rishi Sunak announced Winter Economy Plan- a raft of new support packages for the economy. In addition, existing furlough and self-employed income support schemes are at its end.
Before moving to how you are affected by the Winter Economy Plan, let’s see what winter economy plan is.
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What is the Winter Economy Plan?
The winter economy plan is a collection of schemes, tax deferrals, and initiatives that collectively form the Government’s plan to help protect as many jobs as possible over the winter season.
It is expected that many businesses will suffer as a result of the second wave of COVID cases across the UK.
According to the chancellor, the existing schemes COVID-19 Job Retention Scheme (CJRS) and Self Employed Income Support Scheme (SEISS) could not continue in their existing form.
The replacement of furlough by the job support scheme
The COVID-19 Jobs Retention Scheme – or furlough scheme – will be replaced by the Job Support Scheme. Furlough scheme will end on 31 October 2020 and will not be extended.
The job support scheme will help to keep your business staff employed throughout the winter months when demand may drop due to tighten restrictions of COVID-19.
For the eligibility of job retention scheme, an employee must have to work a third of their contracted hours, and the employer has to pay in full for their working hours.
The Government will pay a third for the two-thirds of the other hours not worked.
Example 1
- Anna works 40% of her regular hours for employer ABC Ltd.
- Anna receives 40% of her usual salary from ABC Ltd for hours she worked.
- The cost of the remaining 60% of her time not worked is shared equally- 20% by ABC Ltd, 20% by the Government and the remainder 20% by Anna.
- Therefore, Anna receives 80% of her regular pay, and the cost is borne 60% by ABC Ltd and 20% by the Government.
Example 2
- John works 70% of his regular hours for the employer XYZ Ltd.
- John receives 70% of his usual salary from his employer for hours worked.
- The cost of the remaining 30% of his time not worked is shared equally- 10% by XYZ Ltd, 10% by the Government and John forgoes 10%.
- Therefore, John receives 90% of his regular pay, and the cost is borne 80% by XYZ Ltd and 10% by the Government.
The job support scheme will start on 01 November 2020 and continue for six months, until April 2021, and open to all size of businesses.
The Job Support Scheme is for those who are on the PAYE payroll.
It’s open to all size of businesses, even if they didn’t use the furlough scheme beforehand.
The Government’s part of the support will be capped at £697.92 per month.
If employers use this scheme, then they can claim the £1,000 jobs retention bonus in January 2021.
Tax cuts extension
- In July, the VAT rate was slashed from 20% to 5% for the hospitality industry. The tax cut was going to last until 21 January 2021 but now extended until 31 March 2021.
- New Payment Scheme for businesses. Under this scheme, businesses can repay deferred VAT in 11 interest-free instalments during the financial year 2021-22.
- For self-assessment taxpayers, additional 12 months payment extension. Payment previously due on 31 July 2020 and 31 January 2021, are now due on 31 January 2022.
Loans- payback time extension
- For Bounce bank loans:
- Payment period increased to 10 years- earlier it was 6 years.
- Payment holiday available
- For CBILS:
- payment period can be extended to 10 years
- now runs until 30 November 2020
Grants for self-employed
If you are self-employed, then you have been able to get two installments of cash since the pandemic hit.
Grants for self-employed will cover 20% of average monthly profits, which is up to a total of £1,875, which is extending from November to January of the coming year.
The second grant will also be available for the self-employed to cover February 2021 to the end of April. Details not yet announced.
The first grant was covering March, April and May were worth 80% of three month’s profit capped at £7,500.
The second was worth 70% of profits over three months – June, July, and August – worth up to £6,750 in total.
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Wrapping up
Changes and extensions in the policies mentioned above will lead to economic recovery and will support business on cash flow. Hence this will be beneficial for the self-employed, workers, and businesses to support the economy into the winter.
