What the winter economy plan means for your finances

This blog was updated 18th December 2020

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

In September, a month before the first furlough scheme was due to end on October 31, Rishi Sunak, the Chancellor announced measures to try and ease more of us through the next six months and support “viable” jobs, with his winter economy plan – the Job Support Scheme- aimed to replace furlough with less generous amounts of government money.

But within a few weeks new tiered restrictions were brought in to different parts of the UK and it became clear that there needed to be more help for workers with businesses forced to shut. 

Then on October 31 it was announced the country would enter a second four week full lockdown from Thursday November 5 and all non-essential businesses will close. To support those unable to work, Sunak said the Job Support Scheme would be on hold for a month, replaced by the furlough scheme, which has been extended until December. Confused, yet? It’s hard to keep up. Here’s a summary to try and understand what you can expect:

Lockdown part two and the extended furlough scheme

The furlough scheme has been extended until the end of April 2021, meaning employees can receive up to 80 per cent of their current salary for hours not worked, up to a maximum of £2,500 a month. 

This is the same as the furlough scheme offered in August and is more generous that what you would have been receiving if you were furloughed during September and October when employers had to chip in. 

For the next month employers only need to pay for staff’s pensions and national insurance contributions. 

The scheme is open to businesses that haven’t furloughed staff before, too, and you can be furloughed even if you weren’t during the summer. You must, however, have been on the payroll on October 30. You can also be furloughed part time, working some but not all of your hours. 

What if I’ve already been made redundant?

Good news, if you were made redundant since September 23 the government has confirmed you can get your job back and then be furloughed. However, it is up to your employer whether they choose to do this, there’s no guarantee.

What happens after March?

In truth, no one can know for sure right now, as the pandemic develops. Some are saying the Job Support Scheme is dead in the water, replaced by more generous furlough. The plan in November 2020 is that the government says after lockdown 2.0 is lifted, they will revert to the Job Support Scheme. 

If the Job Support Scheme continues, here’s what you need to know. The government will contribute towards your wages, as long as you work at least a fifth of your normal hours, if the business you work for is still open. 

Your employer will need to pay you for the hours you’re working, as well as a top up of 5 per cent for the time you’re not. The government will pay up just over 60 per cent of the rest, to a maximum total of £1,541.75 a month. 

It means that you’ll receive a minimum of 73 per cent of your normal pay, where you earn £3,125 a month or less, some of which will have to come from your employer. 

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 for the Job Support Scheme? ** All small and medium businesses can apply for the Job Support Scheme grant, but only large businesses that have seen turnover fall can take part. 

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. 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.

**What if my workplace is still closed after March? ** Many businesses, for example those in the arts where venues are still shut, or those who have lost a huge amount of custom, will not have enough work available that they can bring staff back even for a fifth of normal hours. Some workers may face losing their jobs because there is no work available. But there is help if your workplace is forced to close because of government guidelines, for example placing you in Tier 3 lockdown.

In these circumstances, say you work in a pub in a Tier 3 area and you are unable to work for a week or more, you will be paid up to two thirds of your salary – up to almost £2,100 a month. Your employer will be reimbursed this sum by the government. 

What if you’re facing redundancy?

Very sadly, some of those currently on furlough may be facing redundancy. The Chancellor made it clear that he cannot save all jobs.

If your employer doesn’t want to furlough you or 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.

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 on the amount of money you were earning before being furloughed, not on your reduced furlough wage. There’s more advice in this guide.

It’s worth reminding your employer that, as it stands, 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. 

What if you’re self-employed?

The Self-Employment Income Support Scheme is being extended for another six months until at least 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 80 per cent of your average monthly trading profits for November, December and January, up to a maximum of £7,500 paid into your bank in one go.  

This is more generous than the planned 40 per cent, or £3,750 across all three months, that was expected before the second lockdown. 

The application date has been brought forward to November 30. 

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  business has been impacted by reduced demand, as a result of coronavirus after 1st November. 

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 2021, 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. 

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.