Mini-Budget 2020: How the Summer Statement Will Affect Consumers
As the UK emerges from lockdown, many people are worried about money, employment opportunities, and the future for businesses. The Summer Statement aimed to address these concerns and announced some measures to try to minimise the adverse economic effects brought on by coronavirus.
Throughout the COVID-19 pandemic, individuals have been faced with numerous challenges and many will have experienced difficulties with their finances. Many people will have tried to save money during the coronavirus outbreak, but there is still widespread anxiety about the future and health of the economy.
Now, as restrictions continue to ease and shops open up, the government is focusing on how to revitalise and rebuild the economy to minimise any negative impacts on businesses and consumers. With the end to government support schemes, like the Job Retention Scheme, in sight, individuals may be feeling apprehensive about what the future holds for them personally.
So, as the UK emerges from lockdown, the government is looking to address these concerns. Chancellor Rishi Sunak’s “Plan For Jobs” Summer Statement on 8th July 2020 introduced a variety of measures targeted at protecting businesses, as well as helping individuals.
Some parts of the Summer Statement built on measures that were announced in the Spring Budget, but it also introduced some new initiatives to deal with the unique problems coronavirus has caused.
With a particular focus on preserving and creating employment, this mini-Budget contained plenty of changes that will affect consumers.
Stamp duty cut
From 8th July 2020 until 31st March 2021, individuals in England and Northern Ireland will be able to benefit from a temporary Stamp Duty Land Tax (SDLT) cut.
Previously, you had to start paying stamp duty for properties sold for £125,000 and above (or £300,000 for first-time buyers). However, this threshold has now been raised, so buyers will only need to pay the stamp duty tax on property transactions over £500,000.
This temporary cut in stamp duty will apply to first-time buyers as well as those who have bought property before.
As usual, the rates of stamp duty will increase as the value of the property increases.
Those who are buying second homes and buy-to-let properties will still have a 3% higher rate applied for their property purchases. So, for example, during this period they will pay a 3% rate of stamp duty tax on purchases up to £500,000.
The government estimates that nearly nine out of ten people buying a property during this period will pay no stamp duty at all.
If you are thinking about purchasing a new property, make sure to compare mortgage deals to find the right option for you.
“Eat Out to Help Out” Scheme
Of benefit to all consumers, regardless of age or location in the UK, is the novel “Eat Out to Help Out” Scheme. It is designed to help the businesses most affected by coronavirus by encouraging people to start dining out again.
In August, every customer that eats out at a pub, café, restaurant, or other eat-in establishment, can benefit from a 50% discount on their bill, up to £10 per head. The discount will only be available on Mondays, Tuesdays, and Wednesdays in August 2020. Also, it will only apply to food and non-alcoholic drinks; alcohol is exempt.
A list of participating establishments will be made available on the gov.uk website.
Consumers don’t need to do anything to benefit from this discount (except eat out somewhere!). The eating establishment will automatically apply the discount to their bill, and then the business will be responsible for claiming the discounted money back from the government.
There is no limit to how many times you can make use of this discount scheme.
Coronavirus has had a far-reaching and damaging impact on the economy, and many fear it will cause a spike in unemployment. This is a particular concern for the younger generation who, as figures show, have been some of the most affected by the pandemic.
So, in an attempt to address the unemployment issue and offer increased support to younger job-seekers, the Chancellor announced a number of initiatives in the Summer Statement that aim to get younger people into the workplace.
The major measure that was introduced was the Kickstart Scheme.
The Kickstart Scheme is targeted at 16-24 year olds on Universal Credit and at most risk of long-term unemployment. It aims to give these young people work placements that provide training and employment skills to improve their chances of finding sustainable work in the future.
Under the scheme, employers will offer 6-month work placements to young people, which should be good quality, newly created job opportunities that help the individual to increase their skill set. The government will fund 100% of the scheme. It will initially pay for 25 hours of work a week at the relevant National Minimum Wage, but employers can choose to top up wages and offer more hours if they wish.
The plan is to have the first intake of young people starting their Kickstart placements from the autumn.
Further employment measures
In addition to the Kickstart Scheme, the government has increased its budget for traineeships and apprenticeships.
Employers will now receive £1,000 for every trainee they take on and provide with high-quality work experience. The government aims to triple the number of traineeship opportunities through this funding and by expanding the eligibility criteria, to give more people the chance to receive training. These trainee positions are now open to those with Level 3 qualifications and below.
Similarly, employers will receive payments for offering apprenticeships. From 1st August 2020 until 31st January 2021, employers will receive £2,000 for every new apprentice aged 16-24 they hire, or £1,500 for those aged over 25. These payments are in addition to the existing £1,000 payment employers can already receive for taking on a 16-18 year old apprentice.
In the Summer Statement, Sunak also announced several other measures to help improve employment opportunities. Some of these include:
- Extra funding for the National Careers Service to help give people in England more personalised advice on training and work.
- Funding for job centres to double the number of work coaches.
- Funding for 2020/21 academic year, to give 18-19 year olds the opportunity to study high-value Level 2 and 3 courses when there’s no employment opportunities for them.
- Funding for sector-based work academies which will provide vocational training and interviews.
Green Homes Grant
The Summer Statement placed considerable emphasis on making the economic recovery “green”.
So, as a result, homeowners and landlords in England can apply for a grant to improve the energy-efficiency of their home. It is likely to cover various improvements such as loft, wall, and floor insulation, double glazing, and others.
The government will contribute up to two-thirds of the cost of the energy-saving home improvements, up to a maximum of £5,000 per household. This means for every £1 you spend, the government will pay £2.
Individuals on a lower income will be able to receive grants of up to £10,000.
This Green Homes Grant scheme is set to launch in September.
Because the leisure, hospitality, and tourism sectors have been dramatically affected by coronavirus and lockdown, the government announced a temporary VAT cut to help businesses in these industries.
Between 15th July 2020 and 12th January 2021, VAT will be 5% instead of the usual 20%. This cut applies to food and drink establishments (including those serving takeaway food), overnight holiday accommodation (like hotels), and attractions like theatres, amusement parks, cinemas, zoos, museums, and more.
Although some businesses have said they will pass on the benefit of this tax cut to consumers by reducing the prices of some items, they are not required to do so. It is likely that many businesses will use the money they save on VAT to secure their own financial position as they try to recover from the devastating effects of lockdown, so customers may be largely unaffected by this change.
Other help for consumers
Individuals whose income has been affected by coronavirus have been able to apply for a mortgage payment holiday since March. In May, this was extended so consumers now have until 31st October 2020 to apply for one.
The ban on evictions was also extended until 23rd August 2020, which will help protect renters and give them some security.
If you have taken out any forms of credit, such as a personal loan, a credit card, or car finance, and you are struggling to make payments, you may be able to contact your lender to arrange a payment freeze or agree to make smaller payments. You can apply for a three-month payment holiday on these types of credit until 31st October 2020.
If you pay for any insurance in monthly instalments, you may be able to apply for a holiday on your insurance payments or arrange to make reduced payments up to 18th August 2020. Also, because many people are driving less, some car insurers are offering automatic refunds to their customers, while other insurers are allowing drivers to apply for a refund or, alternatively, lower their annual mileage.
Drivers have benefited from a 6-month MOT extension if their MOT was due to expire between 30th March 2020 and 31st July 2020. However, this will no longer apply from 1st August 2020, so if your MOT is due to expire on or after that date you will need to book your car in for an MOT.
Information can change since publication. Please check gov.uk for the latest updates.
Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more