Chancellor Rishi Sunak has unveiled the contents of his Budget in the House of Commons. Setting out the government's tax and spending plans for the year ahead, he announced new measures to help business and jobs through the pandemic and to support the UK's long-term economic recovery.
One of the measures that the Chancellor announced was the extension of furlough under the Coronavirus Job Retention Scheme until 30 September 2021. In this article, I’ll summarise the key updates and what we know so far.
The wind down of the scheme will be gradual, pegged to the provisional easing of national lockdown restrictions, with the tapering of the scheme applying from July, in line with the provisional ending of restrictions as set out in the Government’s roadmap.
The Chancellor confirmed that the level of grant available to employers under the scheme will stay the same until 30 June 2021.
From 1 July 2021, the level of grant will be reduced. From that date, employers will need to contribute 10% towards the cost of furloughed employees’ wages and 20% towards the cost of employees’ wages from 1 August 2021. To be eligible for the grant, employers must continue to pay their furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough for as long as they use the scheme until the end of the end of September.
HMRC have published the below table which shows the level of Government contribution available until October 2021, the required employer contribution and the amount that the employee receives per month where the employee is furloughed 100% of the time.
Wage caps are proportional to the hours not worked.
| |
May
|
Jun
|
Jul
|
Aug
|
Sept
|
Government contribution:
wages for hours not worked |
80% up to
£2,500
|
80% up to
£2,500
|
70%
up to
£2,187.50
|
60% up to
£1,875
|
60% up to
£1,875
|
| Employer contribution: employer National Insurance contributions and pension contributions |
Yes |
Yes |
Yes |
Yes |
Yes |
| Employer contribution wages for hours not worked |
No |
No |
10% up
to £312.50 |
20% up to £625 |
20% up to £625 |
| For hours not worked employee receives |
80% up to
£2,500 per month
|
80% up to
£2,500 per month
|
80%
up to
£2,500 per month
|
80% up to £2,500 per month
|
80% up to
£2,500 per month
|
HMRC updated their guidance on 3 March to provide that from May 2021, the scheme will also open to new entrants who have not previously been furloughed under the scheme. For periods starting on or after 1 May 2021, employers can claim for employees who were employed on 2 March 2021, as long as they have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee. Employers do not need to have previously claimed for an employee before the 2 March 2021 to claim for periods starting on or after 1 May 2021.
November 2020 saw the lowest number of planned redundancies since the start of the coronavirus pandemic, which suggests that the Chancellor’s previous decision to extend the scheme until 30 April 2021 helped to protect jobs (at least in the short-term), and that the further extension of the scheme to the end of September will continue to avoid redundancies that may otherwise be planned without the scheme extension.
If you’re unsure about anything I have discussed in this article or would like further employer furlough information, access our Law Hub to download our full and flexible furlough agreements and guidance.
To find out more about the Budget announcement and what this means for our SME clients, click here to read our expert tax overview and register here for our upcoming webinar which will delve deeper into what the Budget means for UK SMEs.