Carousel_Arrow Chat icon_cookie IHT_trust_wills IR35 Combined Shape 2 Group 10 Login Mobile Menu Share Share Email SubMenuMobile Group 9 VAT View_Gallery View_List capital_allow Triangle 2 Copy Close construction cyberpro employment_tax_shares emplyer_solutions entrepreneurs_corps fee_protect Group 7 grant_fund Group i_Clock i_Consult i_Done i_Eligibility_Tick i_Enter i_Filter i_HMRC i_Negative i_Play i_Plus i_Reset i_Support_Legal i_Support_TaxDesk i_Support_VAT i_Tick noun_marketing_1872083 noun_online_2126759 i_download i_meet Group Copy 24 Group 18 noun_electrical_1240755 copy noun_Technology_2125422 noun_Science_2031115 i_tick_bullet_block international_tax patent_box private_client property_sdlt r_and_d reliefs_incentives Search specialist_tax status tax_indemnity valuation YouTube
Markel Tax

05 Mar 2021

Budget 2021: Furlough extended until October 2021

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.

Tagged HMRC COVID-19
Next article in series

05 Mar 2021

“Whatever it takes”: a summary of 2021’s Budget and its implications