What the Summer Statement means for your money

Weatherbys Private Bank




What the Summer Statement means for your money

David Stead, Senior Private Banker

As chancellor, Rishi Sunak has had something of a baptism of fire, taking the position during the coronavirus outbreak. Having delivered a substantial package of support in March, expectations were high for his summer statement.

A promise to pay for (certain) meals out was the most headline-grabbing statement, but what other changes did he make and how might they affect your money?

Stamp duty

One of the more eye-catching – though widely leaked – moves was a significant reduction in stamp duty land tax for home buyers.

From July 8 to March 31, the stamp duty land tax threshold has been raised to £500,000 (from £125,000) for all purchasers. Note that this includes landlords and those buying second homes, although they are still liable for the 3% stamp duty surcharge.

For purchases above £500,000, the pre-existing stamp duty levels apply, so buyers will pay 5% tax on the element of any purchase above £500,000 – in effect, saving £15,000 on what would have been payable prior to this change.

(Note that this change only applies to England and Northern Ireland – stamp duty is devolved in Scotland and Wales, so those governments will receive funds in lieu which they may or may not use to put similar measures in place).

Home improvements

For more on the property front, from September, a £2bn package of “Green Homes” grants will be available to homeowners and landlords to spend on energy efficiency measures (such as upgrading boilers, improving insulation, double glazing, and other improvements).

The grant will cover two-thirds of the cost of such upgrades, up to a value of £5,000 per household (with 100% of the cost up to £10,000 available for low income households).

Employment

The chancellor confirmed that the furlough measures will end as scheduled in October. However, employers have been incentivised to bring staff back from furlough (rather than move onto redundancies). For each furloughed member of staff who is returned to work until at least the end of January, employers will receive a £1,000 bonus.

Meanwhile, in an effort to combat the risk of lasting youth unemployment, the government launched a £2bn scheme to fund six-month work placements for 16-24 year olds, plus additional money for traineeships and apprenticeships.

The leisure and hospitality sectors

The hospitality and tourism industry benefits from a cut in VAT from 20% to 5%, up until January 12. This will cover everything from hotels to cinemas to restaurants (though alcoholic drinks are not included). 

Meanwhile, the chancellor will also subsidise 50% off meals, up to £10 a head (alcohol not included), from Mondays to Wednesdays during August, at all participating restaurants. 

What he didn't do

The main exclusion from the summer statement was any idea of exactly how all of this will be paid for. With a potential cost of £30bn, the chancellor is spending another 1.4% of GDP on top of the 6% he already announced back in March. Clearly, the spending will only reach £30bn if the schemes work (the Job Retention bonus scheme alone has an estimated maximum cost of £9.4bn, so hinges on employers deciding to take staff back), but it’s an extraordinary sum by any standards.

However, for now it’s a case of getting the UK through the coronavirus. It’s possible that the question of the public finances will be addressed at the Budget and Spending Review later this year, but that will very much depend on the mood of the population, the success of this batch of measures, and the progress made in tackling the pandemic by that point.

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