Mini Budget July 2020: Key Points
On the 8th July 2020, Rishi Sunak (the Chancellor of the Exchequer) set out the next round of financial provisions aimed at counteracting the contraction of the economy due to the impact of coronavirus.
The headline policies from the fiscal event, dubbed a ‘mini-budget,’ are as follows:
1.Furlough Funding Eased – The furlough scheme will gradually wind down before concluding at the end of October. Currently, the Government pays 80% of wages up to £2,500 plus associated National Insurance contributions (NICs) and pension contributions leading to a maximum grant of £2,804 per employee.
However, there are several changes proposed in the coming months to ease this finance:
- August – Employers will now need to pay employers NICs and pension contributions
- September – Employers to contribute 10% of wages.
- October – Employers to contribute 20% of wages in the last month of the scheme.
2. Job Retention Bonus – This one-off payment of £1,000 will be available to employers subject to them successfully bringing employees back from furlough and continuously employing them through to January 2021. The £1,000 bonus is per employee and will be made from February 2021.
3. Stamp Duty Land Tax (SDLT) Cut– Reacting to the fact that house prices have fallen for the first time in 8 years, SDLT rates have been temporarily reduced for the purchase of residential property.
The main change is that the threshold for a 0% tax rate has been increased from £125,000 up to £500,000. This means that you can now purchase a house worth up to £500,000 without paying any SDLT, whilst before you could have paid tax on purchases above £125,000.
Other cuts have included reducing the range in the 5% tax band and cutting rates for those buying buy-to-let properties and second homes.
The changes are to apply instantly i.e. from the 8th July until the 31st March 2021, and will apply throughout England and Northern Ireland. It is not yet confirmed whether there will be any changes to Scotland’s and Wales’ similar but separate tax regimes (Land and Building Transaction Tax and Land Transaction Tax respectively ).
It is important to note that the Higher Rates for Additional Properties (i.e. the 3% surcharge) will continue to apply.
4. VAT Rate Cut– VAT has been cut by 15% for the hospitality and tourism industries.
Mr Sunak has confirmed that VAT usually charged at 20% will be cut to 5% for establishments such as:
- Eat-in or hot takeaway food from restaurants, cafes and pubs;
- Accommodation in hotels, bed-and-breakfasts, and caravan sites; and
- Attractions such as theme parks and zoos.
The change will commence from 15th July until January 12th 2021, with the relief set to help protect 2.4 million jobs.
Further guidance will be published by HMRC in the next few days. However, it should be noted that these provisions are additional to previous measures such as the ability to defer VAT payments until next March.
The above measures along with further measures such as the Kick Start Scheme, Green jobs and ‘Eat Out to Help Out’ are expected to cost the Treasury around £30bn.