What you need to know about the latest financial policies.
The Chancellor Rishi Sunak today announced a number of measures that the government hopes will kick start the economy. Effectively a mini-budget, the “Summer Statement”, brings through more spending initiatives and tax cuts to help us through the crisis.
After lots of speculation, including the idea that everyone could get a £500 voucher, here are the key policies that could affect you, as well as a little more detail about a few things announced in the last few days.
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Job Retention Bonus
The Chancellor said the focus of this announcement was jobs. The Chancellor was adamant that the Coronavirus Job Retention Scheme, aka furlough, is still set to finish at the end of October, with contributions from employers starting in August.
After this there will be a bonus for employers who bring people back from the scheme.
If someone is continuously employed after furlough until the end of January 2021, the employer will get a bonus of £1,000 per employee.
To be eligible the employee needs to be paid at least £520 a month in November 2021, December 2021 and January 2021. We’ll get more details at the end of July.
Paid job scheme for 16-24-year-olds
Young people on Universal Credit will receive a total of £2bn via a temporary work scheme called “Kick Start”. The idea is that employers will be funded to give around £350,000 under 25’s a paid six-month placement at the national minimum wage.
The government money will only be for 25 hours, so employers can choose to pay for additional hours or a higher wage. Overheads will also be covered.
It’s to be targetted at those most likely to face long term unemployment and there should be hundreds of thousands of people who can take advantage,
The jobs have to be new jobs and help skill people up to find further work.
Funds for training and apprenticeships
This is alongside money that’ll boost traineeships and work experience. This includes money to fund new trainee schemes to upskill people on things like maths and CV writing while giving employers £1,000 for giving placements of 60 to 90 hours.
There will also be a £2,000 bonus per new apprentice hired, or £1,500 for apprentices aged 25 or over.
VAT cut for hospitality and tourism
The idea of cutting VAT is to get us shopping and spending. It was expected to be across the board but it was targetted at just one industry, and at a much larger than expected too.
This time, the temporary cut will see the rate drop from 20% to 5% in the hospitality and tourism sectors. This includes restaurants, hotels, cinemas, zoos and other attractions.
The change comes into play on Wednesday 15th July until 12th January 2021. We should get more details soon, though for example, cafes or pubs that don’t serve food won’t benefit, nor will places that don’t offer “eat in” or “hot takeaways”. And alcohol won’t be included.
But it does means you’ll see the price you pay at most of these businesses drop. For example, say a cinema ticket was £12, it’ll now be £10.50.
So the individual savings won’t be massive, but they will add up. Say as a household you spent £1,050 in those six months (that’s £175 a month), it would save you a total of £150.
Eat Out to Stay Out
A surprise move was to announce a discount at restaurants throughout August 2021. Moving in on the Tastecard and Meerkat Meals market, the government will subsidise every person who eats out by 50%, up to £10 per head.
It’ll only be at participating restaurants who will charge you the discounted price and claim the money back from the government. It’ll also only be Monday to Wednesday.
Stamp duty holiday
An immediate change is that you’ll only pay stamp duty on properties valued above £500,000. The tax holiday will end on 31st March 2021.
The idea behind this is to get people buying and selling their homes. Importantly this is just for England and Northern Ireland as there are different schemes in Scotland and Wales (though they might do something similar).
So how much will this save? With the average price in the UK £231,855 (as of the latest figures from March 2021), the new stamp duty cost would be zero, saving £2,137.
If you’re in a more expensive area, such as London, the average property price is £485,794. Buyers will be saving £14,289.
Stamp duty before today
The stamp duty charges that will return in March are as follows. Normally there’s no stamp duty on the first £125,000 (£300,000 for first-time buyers), and then you get charged a percentage of the value above this. Just how much this is increases as the property value goes up.
- 2% on the next £125,000 (so between £125,001 and £250,000)
- 5% on the next £675,000 (so between £250,001 and £925,000)
- 10% on the next £575,000 (so between £925,001 and £1.5m)
- 12% on anything above £1.5m
There’s no change for properties above £500,001, so after that first half a million is accounted for the ranges will come into play. And there will still be an additional charge if it’s not your first or only property.
There will be £2bn worth of grants to help homeowners make their properties more energy-efficient. Those eligible will get up to £5,000 to put towards things like double glazing or loft insulation, floor or cavity wall insulation.
Low-income households will be eligible for 100% of the costs, but for most people the money will only be for part of the work. You’ll need to pay the rest yourself. You’ll also miss out as a renter unless your landlord wants to apply and pay.
It’ll go live in September 2021 and you’ll have to use approved companies to do the work. Around 650,000 households are expected to benefit.
There’s also another £1bn of funds to help reduce carbon emissions in public buildings.
Late last week the government announced £1.57bn in funds to help the struggling arts and culture sectors. Around half the cash will be given out as grants.
There’s still no support for the one to three million self-employed, freelancers and Limited Company directors (aka “Excluded UK”).
There also wasn’t any help for non-leisure businesses. VAT will stay at 20% and there was no “helicopter money” voucher scheme.