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A summary of the Economic Update.

Chancellor unveils a plan for jobs

On 8 July Chancellor Rishi Sunak unveiled a three-point plan to support jobs as the UK economy begins its recovery from the coronavirus (COVID-19) lockdown. The first phase of the COVID-19 pandemic created extraordinary challenges for businesses and the wider economy, prompting the UK government to respond with a raft of unprecedented measures.

As lockdown rules are being relaxed and support schemes are being wound down, the Chancellor announced a raft of measures to create jobs, protect jobs and help people find work. Here, we look at Mr Sunak’s Summer Economic Update and what it means for businesses and individuals.

Furlough scheme replaced with 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 crisis.

The Chancellor said furloughing had been the right measure to protect jobs through the first phase of the crisis and it 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.

Kickstart Scheme for young people

The Chancellor also 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.

The aim of the scheme is to give young people the chance to build their confidence and skills in the workplace and then 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.

More changes to support jobs

To address the ongoing challenges that the economy faces, the government has 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 will include a boost to the National Careers Service, enhanced work search support and payments of £1,000 for employers who give trainees work experience, £2,000 for those who hire new apprentices aged under 25 and £1,500 for hiring older apprentices.

Eat Out to Help Out

One of the more eye-catching announcements made by Mr Sunak is the launch of a ‘eat out to help out’ scheme designed to encourage people to return to eating out in restaurants and cafés.

This will entitle every diner 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 cut 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.

Stamp duty temporarily reduced

The Chancellor also introduced measures to bolster the construction sector and boost confidence in the flagging housing market in his Summer Economic Update.

Property transactions fell by 50% in May this year and house prices have fallen for the first time in eight years. In response, the government will temporarily increase the nil-rate band of residential Stamp Duty Land Tax (SDLT) in England and Northern Ireland from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021.

However, 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 is to raise the threshold at which LBTT is paid, from £145,000 to £250,000, ‘as quickly as possible’. Once introduced this will remain in force until 31 March 2021. The Welsh government has 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 on additional properties, including buy-to-let and second homes.

Additionally, the Chancellor announced a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. The scheme aims to upgrade over 600,000 homes across England, helping to reduce energy bills and support the green economy.

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