On Wednesday 8 July the UK Chancellor, Rishi Sunak, delivered a short Budget Statement, in the light of the Covid-19 crisis. The Statement, which formed the second phase of the UK Government’s response to the pandemic, was focused on setting the UK towards economic recovery. Peter Webb, our International Tax Manager, takes a look at the key tax takeaways to be aware of.
There was little preamble to this Summer Statement; the half-empty chamber Mr Sunak was addressing was a stark enough reminder of the grim backdrop to his speech. As expected, there were no tax increases; that is for another time. The immediate focus was on kickstarting an ailing economy, with a number of key announcements as part of an additional £30 billion support package.
Value Added Tax (VAT)
VAT is a transaction tax, added to the cost of the purchase of goods and services. Rishi Sunak announced a cut in the rate of VAT on food, non-alcoholic drink, accommodation and attractions in the UK from 20% to 5% between 8 July 2020 and 12 January 2021. This is a welcome relief for some of the business sectors who have suffered the most during the current crisis.
Job Retention Scheme and support for young workers
Mr Sunak was keen to stress his focus on the ‘nobility of work’, and his desire to get as many people into jobs as possible. A slew of measures with a cost of £9 billion were announced to encourage employers to provide work placements for young workers. In addition, companies will receive a one-off bonus of £1,000 for re-employing furloughed staff.
Stamp Duty Land Tax (SDLT)
Stamp Duty Land Tax is the tax you pay to purchase a property. An immediate cut in SDLT for England and Northern Ireland will run until 31March 2021, for those purchasing property up to £500,000. However, if you are purchasing an additional property a 3% Stamp Duty Land Tax surcharge still stands. Approximately nine out of ten property purchases will benefit from the cut, with the tax saving as high as £15,000. Do bear in mind that this tax break will not be backdated and there are already stories of homeowners completing property purchases a few days before yesterday’s statement who would have saved thousands of pounds if they had completed, in some cases, just a few hours later.
Finally, in a bid to revitalise the hospitality and leisure sector, and rebuild consumer confidence, Mr Sunak unveiled an ‘eat out scheme’ which offers a 50% discount for every diner, up to £10 a head, from Monday to Wednesday throughout August.
It’s no surprise that yesterday’s announcements appear to be an attempt to begin to rescue the UK’s economy – most notably through the important summer season. With the Autumn Budget coming in just a few months, it will be clearer as to how the Government will rebuild things over the longer term, and start to pay for the significant budget deficit which the crisis has created.