Reviewing the measures announced in the Summer Economic Update

17 Jul 2020

In the wake of the economic uncertainty caused by the coronavirus (COVID-19) lockdown, Chancellor Rishi Sunak recently presented a Summer Economic Update, in which he outlined measures to boost the UK economy and protect jobs. Here, we consider some of the headline measures.

New Job Retention Bonus

The Coronavirus Job Retention Scheme (CJRS) and Self-employment Income Support Scheme (SEISS) are being wound down after helping support 11 million people through the pandemic.

The Chancellor said furloughing had been the right step to take to protect jobs during the first phase of the COVID-19 pandemic. The CJRS will be followed by a Job Retention Bonus. This will see UK employers receive a one-off payment of £1,000 for each furloughed employee who is still employed as of 31 January 2021. To qualify for the payment, the employee must be paid at least £520 on average in each month from November to January. Payments will be made from February 2021 and further details on this scheme will be announced by the end of July.

Support for young people

The Chancellor launched a £2 billion Kickstart Scheme that will aim to create high-quality, subsidised six-month placements for young people at risk of long-term unemployment as a result of the pandemic. The scheme aims to give young people the chance to build their confidence and skills in the workplace and to gain experience that will improve their chances of going on to find long-term, sustainable work.

The Kickstart Scheme will see the creation of work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer national insurance contributions (NICs) and employer minimum automatic enrolment contributions. Employers will be able to top this wage up if they so wish.

A plan for jobs

The government has created a large-scale plan to support people in finding jobs, enable them to gain the skills they need to get jobs and provide targeted help for young people to get into work.

Measures include a boost to the National Careers Service, enhanced work search support, payments of £1,000 for employers who give trainees work experience, payments of £2,000 for those who hire new apprentices aged under 25 and payments of £1,500 for businesses hiring older apprentices.

Measures to support the hospitality and tourism sector

One of the more headline-grabbing announcements made by the Chancellor was the unveiling of the Eat Out to Help Out scheme, which is designed to encourage people to return to eating out in restaurants and cafés.

Under the scheme, every diner will be entitled to a 50% discount of up to £10 per head on their meal at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for the month of August across the UK. Participating establishments will be fully reimbursed for the 50% discount.

In order to further support the hospitality and tourism sector, the Chancellor reduced the rate of VAT from 20% to 5%. This applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, as well as supplies of accommodation and admission to attractions, including theme parks and zoos, across the UK.

Temporary reduction in stamp duty

In the Summer Economic Update, the Chancellor also introduced measures to boost confidence in the flagging housing market.

The government has temporarily increased the nil-rate band of residential Stamp Duty Land Tax (SDLT) in England and Northern Ireland from £125,000 to £500,000. This applies from 8 July 2020 until 31 March 2021.

Both Scotland and Wales have their own versions of SDLT, namely the Land and Buildings Transaction Tax (LBTT) and the Land Transaction Tax (LTT). The Scottish government has raised the threshold at which LBTT is paid from £145,000 to £250,000. This applies from 15 July 2020 until 31 March 2021. The Welsh government also raised the threshold at which LTT is paid from £180,000 to £250,000, effective from 27 July 2020 until 31 March 2021. However, the tax reduction in Wales will not apply to purchases of additional properties, including buy-to-lets and second homes.

As ever, Practice Track Online will be keeping abreast of any changes to the COVID-19 support schemes and grants in order to keep you up to date.

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