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Summer Budget 2020 Update

Posted: 9th Jul 2020 by Clair Watmore Budget 2020, Coronavirus

There has been a lot of speculation over recent weeks regarding the contents of Rishi Sunak’s summer budget. Many anticipated changes to VAT and stamp duty but there were some complete surprises. For property investors, the reduction to stamp duty creates some significant savings too.

Here are the details of the announcements:

VAT

The VAT rate is being cut from 20% to 5% for the hospitality and leisure sectors starting on 15 July 2020 until 12 January 2021. This is aimed at supporting tourist attractions, restaurants, hotels and holiday accommodation, plus eateries – cafes and restaurants. Alcohol is not included in this new rate.

Jobs Retention Bonus

Closely connected to the VAT reduction policy is an announcement that no one was expecting – a jobs retention bonus. The furlough scheme will be ending in October and there has been a fear that this is just delaying the inevitable with mass unemployment following with workers in the hospitality sector especially vulnerable.

To try and avoid this situation post October, the chancellor is launching a bonus scheme for all employers who bring previously furloughed workers back into the workplace. This scheme applies to any employees who have been on the furlough scheme at any point since it first launched.

An employer needs to be paying their worker a minimum level of £520 per month and be employing them until the end of January 2021 to qualify for the one-off payment. We will update you with the relevant information as soon as it is published.

Stamp Duty Holiday

The health of the housing market has a significant impact on the rest of the economy in terms of consumer demand and general levels of confidence.  Early reports show that house prices have already dropped slightly as a result of the Covid-19 lockdown, so the anticipated stamp duty (SDLT) cut wasn’t a surprise.

The SDLT threshold is being increased to include property values of up to £500,000 and this will become effective from 9 July 2020, lasting until 31 March 2021.

It means 90% of people who are buying a home won’t have to pay any SDLT and for those that do, their average saving will be £4,500. This policy will cost around £3.8bn to implement.

Significantly, it would appear that second homeowners and property investors can also qualify for the SDLT holiday but would still have to pay the current 3% surcharge.

How is the new stamp duty rate calculated?

Stamp duty (SDLT) is applied according to a sliding scale, so even where it is still payable on property transactions, there will be a potential saving through the holiday period.

The new thresholds (from 9 July 2020) are as follows for differing property values: 

  • No stamp duty to £500,000
  • 5% from £500,001 to £925,000
  • 10% on £925,001 to £1.5 m
  • 12% on any value above £1.5 m

Kickstart Scheme and measures to help people find work

The government will provide an additional £111 million this year for traineeships in England, to fund high quality work placements and training for 16-24 year olds. For the first time ever, the government will fund employers who provide trainees with work experience, at a rate of £1,000 per trainee. The government will also introduce a new payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1st August 2020 to 31st January 2021. These payments will be in addition to the existing £1,000 payment the government already provides for new 16-18 year-old apprentices, and those aged under 25 with an Education, Health and Care Plan – where that applies.

Green grants

Several other schemes and grants have been launched for consumers, including a £5 billion green homes grant. This is available to homeowners and landlords to improve the energy efficiency of their homes and create local jobs. For most households, up to £5,000 is available.

Eating out grant

Over the past week, the media were speculating about a £500 voucher to spend in the high street, as other countries have offered to kick start their economies.  The chancellor ultimately unveiled something totally unexpected – an “eat out to help out” scheme.

Starting in August, all consumers will have the chance to benefit from up to 50% off when they eat in participating restaurants up to a maximum of £10 per head. Children are included and it will be available from Monday to Wednesday. A website for restaurants, cafes and pubs to use to sign-up for the scheme is expected to launch on Monday. 13 July 2020.

Conclusion

The measures outlined by the Chancellor continue to put support for jobs firmly at the centre of the Government’s approach to rebuilding the economy as we emerge from the Coronavirus outbreak.

However, with today’s measures expected to cost around a further £30 billion, it remains to be seen how they will be funded in the long-term, with the Chancellor having previously hinted at tax changes in future Budgets.

Read Rishi Sunak’s full speech and full policy document.

As more details surrounding the different supports schemes are announced we will share the information with you.

Look out for our updates but in the meantime if you require further information contact enquiries@hghyork.co.uk or call us on 01904 655202.