Mini Budget Update

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Mini Budget Update

On 8th July the chancellor announced a range of new measures to get the economy moving again.  We’ve summarised the key changes: 

  • For employers
  • For the hospitality and leisure industry, and
  • The property market

For Employers:

£1,000 Furlough Bonus

A one-off Job Retention Bonus of £1,000 will be paid to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. 

This is the only information we have at this point, and further detail is expected to be announced by the end of July.  Hopefully this will extend to any employee who has been furloughed (even if only for the minimum time) and although not enough to persuade you to hold a job where one can’t be justified, should be a welcome bonus next year. 

Kickstart Scheme

The government will fund employers to take on 16 to 24-year-olds for a six month work placement of a minimum of 25 hours per week at the National Minimum Wage (NMW) and cover the cost of employment.

Apprentice Bonus

To encourage businesses to take on new employees, a payment of £1,000 for each new trainee they hire and £2,000 for each new apprentice they hire aged under 25, plus a £1,500 bonus for each new apprentice they hire aged 25 and over, from 1st August 2020 to 31st January 2021. 

For the hospitality and leisure industry: 

Temporary VAT cut for food and non-alcoholic drinks

From 15 July 2020 to 12 January 2021, to support businesses and jobs in the hospitality sector, the reduced (5%) rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. 

Temporary VAT cut for accommodation and attractions

From 15 July 2020 to 12 January 2021, the reduced (5%) rate of VAT will apply to supplies of accommodation and admission to attractions across the UK. 

How will this work?

Further guidance is expected to be published by HMRC in the coming days.  Although a welcome measure, businesses will have to act quickly to implement the changes to the VAT rate.   If you use software such as Xero there is already a tax rate set up for 5% and you will have to apply that rate for any sales after 15th July, you may also need to reduce the rate to 5% for any relevant business purchases.  

It is also unclear whether this measure is intended to be passed on to the customer or retained by the business, it will certainly – and quickly – assist with the profits of these businesses which have seen income slashed, so they may feel they need to retain this benefit.  However, reducing prices enables them to encourage customers to spend money with them, therefore increasing footfall and getting back to normal faster.  It’s a decision for each business will have to make. 

If your prices are vat inclusive you can use the fraction 1/21 to calculate the vat at 5%.  Don’t forget that alcoholic drinks are still 20% VAT so these will need to be split carefully. 

Flat rates are expected to be adjusted for the change in rate, we will need to wait for HMRC’s guidance on this. 

Unfortunately for many other businesses who have only recently opened and some which are still closed they do not appear to be included in this measure. 

Eat Out to Help Out

The government will introduce the Eat Out to Help Out scheme to encourage people to return to eating out. 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 entire month of August 2020 across the UK. Participating establishments will be fully reimbursed for the 50% discount.

For the Property Market:

Temporary Stamp Duty Land Tax (SDLT) cut

The government will temporarily increase the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021 and cut the tax due for everyone who would have paid SDLT. Nearly nine out of ten people getting on or moving up the property ladder will pay no SDLT at all.

Green Homes Grant

The government will introduce 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. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household. 

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