Loads of announcements yesterday and lots to take in.

Here is my summary of how this will affect my clients – and what we still need some guidance on:

Job Retention Scheme:

We have final confirmation that this will end in October 2020 with the gradual wind down already announced.
However, the Job Retention Bonus has been announced.

Under this, the government will pay a £1,000 bonus to employers for each furloughed employee that they retain until January 2021.  The employee must earn at least £520 per month between November and January 2021.  The bonus will be paid in February.

More detail on this is due to be announced soon and clarification is needed around directors.  There is nothing at the moment to say that a furloughed director returning to work is excluded, but we will need to wait and see.

KickStart Scheme

This scheme is to encourage employers to take on 16-24 year olds.

To qualify, it must be a new job, paying national minimum wage and be for at least 25 hours per week. If these are met, the government will pay these employees wages for 6 months.  It does appear that they will only pay the relevant NMW for these employees, so if you pay these new employees above the NMW, this may not be covered.  Again, we need more details to be announced to confirm.

Trainees and Apprenticeships

From August, £1,000 is to be paid for new trainees and £2000 for employers who create new apprenticeships for the under 25’s.  And additional £1,500 will be paid for taking on apprenticeships aged over 25.

VAT

The VAT on food and accommodation is being cut from 20% to 5% for the next 6 months starting on 15 July.

The reduced rate will apply to supplies of food and non-alcoholic drinks from restaurants, pubs and cafes.

Further guidance on the full scope of this relief will be published in the next few days.  Accounting for this one is going to be fun!!

Eat out to Help out

This one really wasn’t expected and aims to encourage us to go back out to our local restaurants.

Every diner will get 50% of their meal and non-alcoholic drinks, up to £10 per head, from any participating establishment for the month of August.

The discount has unlimited use and can be used on Monday – Wednesdays.  The restaurant will then reclaim the money from the government which it can do weekly.  More accounting fun!!

Stamp Duty Cut

The current threshold of £125,000 will rise to £500,000 from 8 July 2020 to 31 March 2021 so there will be no stamp duty on the first £500,000 of the purchase price (for your sole property.)  Above this rate, the percentages remain unchanged, but this potentially saves £15,000 on a property over £500,000.

All these measures are designed to get the economy moving again, in the face of the massive predicted economic recession.

The next budget is in the Autumn, when no doubt we will find out, how we are all going to pay for this!

If you have any queries, then please contact Rosie Forsyth at Wilkins & Co.

If you have received your self assessment statement this month from HMRC, you may be confused by the amount that it is telling you is due.

Payments on account of tax are part of self-assessment and never easy to get your head around.

Keeping things simple, you usually pay 2 payments “on account” of your 19/20 tax bill during the year, one in Jan 2020 and one in July 2020.  The amount you pay is based on your last submitted tax return, and HMRC assumes you will have exactly the same income again in the next tax year.

So if your tax liability under self assessment last year was £2,000, HMRC will ask you to pay £1,000 in Jan 2020 and £1,000 in July 2020 as an upfront payment on account of your 19/20 tax.

Obviously, it is extremely unlikely that you tax bill will be exactly the same each year, so once you have submitted your 19/20 tax return, HMRC will work out the actual amount that is due for the year.  In our example, say your final actual tax bill is £2,400.  You will have already paid £2,000 on account of this, so you will owe £400 at 31 January 2021.

The cycle then starts again though, so at 31 January 2021 you will also pay your first payment on account of your 20/21 tax, which HMRC will calculate as £1,200, so the total amount they ask you in Jan 2021, will be the £400 plus the £1,200, making £1,600 in total.

There are situations where a payment on account is not required but these are not covered here.

Payment on Account Deferral

Under the Gov help offered for Coronavirus, the payment on account that was due at 31 July 2020 has been deferred by HMRC -and this seems to have been done automatically.  Therefore if you receive a statement from HMRC this month, you will see that the due date for this second payment on account is 31 Jan 2021, and not 31 July 2020.

You can of course make the payment now, but if it helps cashflow, the payment can be deferred.

If you have lower profit for 19/20 than you did the year before, then it is well worth getting your tax return completed for the year and submitted, as if you are due a repayment, this will be issued as soon as your return is submitted – you won’t have to wait until 31 Jan 2021 for this!

For more information or assistance with personal tax returns, please contact Rosie Forsyth at Wilkins & Co.