The chancellor has unveiled his support package to get us through the winter months. Money expert Laura Whateley explains what they mean for your finances
There’s just over a month to go of the furlough scheme. Coupled with the spectre of even tougher lockdown restrictions (just as socially-distanced park drinks weather comes to a painfully abrupt end) the autumn looks like it could be a challenging time for our finances, to say the least.
Citizens Advice warns that its advisers are already helping one person every two minutes with a redundancy issue.
Rishi Sunak, the Chancellor, yesterday announced measures to try and ease more of us through the next six months and support “viable” jobs, with his winter economy plan. Here’s what you can expect
If you’re currently on furlough
The original Coronavirus Job Retention Scheme, launched at the beginning of the pandemic, comes to an end on 31stOctober. At present if you’ve been furloughed under the scheme you may be back working part time, with the government paying 70 per cent of your salary, up to £2,190 a month. In October that reduces to 60 per cent of your salary, up to £1,875 a month.
Sunak has said this scheme will not be extended. Instead he has introduced the Job Support Scheme, which is, unfortunately, less generous and far reaching.
How the Job Support Scheme works
The scheme works as follows: from 1st November for six months until April the government will contribute towards your wages as long as you work at least a third of your normal hours.
Your employer will need to pay you for the hours you’re working, as well as a third of the time you’re not, the government will top up the final third, up to a total of £697.92 a month.
It means that you’ll receive a minimum of 77 per cent of your normal pay, most of which will have to come from your employer, and you’ll have to have a job to do at least a third of the time you normally work. The furlough scheme paid up to 80 per cent of wages.
This will only apply to wages, the government will not contribute towards national insurance or pension payments, which can be expensive for employers. Pensions contributions should still reflect your total pay packet.
It’s worth noting: if you’ve been furloughed already, the pay you receive in the new Job Support Scheme will be based on your pre-furlough wages.
Who is eligible?
All small and medium businesses can apply for the Job Support Scheme grant, but only large businesses that have seen turnover fall will be eligible.
For you to be eligible, you must have been on your company’s payroll since 23rd September but you can’t already be on redundancy notice.
You don’t have to have been furloughed to be eligible for the Job Support Scheme. In fact some workers might find that it allows them to remain employed when they feared they would be made redundant, by working fewer hours.
There’s no guarantee that those who have been furloughed will roll into this scheme, it will be up to your employer. Many businesses, for example those in the arts where venues are still shut, will not have enough work available that they can bring staff back even for a third of normal hours.
If you’re facing redundancy
Very sadly, that means many of those currently on furlough may be facing redundancy. The Chancellor made it clear that he cannot save all jobs and that this scheme applies only to those in “viable” jobs.
If your employer doesn’t want to move you onto the new scheme, or there is not enough work to be employed for a minimum of a third of normal hours, you may be let go at any time, even before the end of the furlough scheme.
You should receive some statutory redundancy pay if you have worked for your employer for at least two years, and this pay should be based not on your reduced furlough wage but the amount of money you were earning before being furloughed. There’s more advice in this guide.
It’s worth reminding your employer that they can still claim the £1,000 jobs retention bonus – an injection of cash for keeping furloughed staff on after the scheme ends – even if they use the Job Support Scheme.
If you’re self employed
The Self-Employment Income Support Scheme is being extended for another six months until April 2021.
The extension will amount to two more grants, the first for the three months from November until the end of January, will be the equivalent of 20 per cent of your average monthly trading profits, up to a maximum of £1,875 in total, paid into your bank in one go. This is significantly less than the previous grant which paid out up to 70 per cent or £6,570 in total.
It has not yet been confirmed how much the second grant, due early February, will be worth.
Who is eligible?
This applies to anyone who was eligible for the first two payments (that’s those who have filled out a self-assessment return for the tax year 2018/2019, earned less than £50,000, and who generated at least half their earnings by self-employment).
You’ll need to declare that you are still trading and will continue to do so, and that your income will be adversely affected by coronavirus after 1st November.
If you haven’t claimed the previous grants, make sure you do, you have until 19th October.
Tax bill respite
Those who fill out self-assessment tax returns now have more time to find enough cash for their tax bill.
You were already able to delay tax due by 31st July 2020 until 31st January 2020, now you have a further 12 months for tax due by 31st January, which is now not payable in full until January 2022. Again, details on how this will work are yet to be announced.
If you pay VAT you also have more time. You can delay money that was due between March and June 2020 to beyond March 2021, spreading repayments over 2021 and 2022.
If you work in hospitality or tourism, hardest hit by the pandemic, the current temporary VAT reduction has been extended. It will now stay at 5 per cent until March 2021. This also means that holidays and meals out might be slightly cheaper.
It remains to be seen how the winter of 2020/21 will pan out, and how much these measures will make a difference to individuals’ finances. If 2020 has taught us one thing, it’s to be ready for the unexpected, so if you haven’t already, it’s time to take a look at how you can make your money resilient. You can read my tips for that here.
Laura Whateley is a freelance writer and author of Sunday Times bestselling book Money: a user’s guide. She has written for a wide variety of publications including The Times, The Guardian, Grazia, Refinery 29, Elle and Stylist Magazine. All views are her own.