Chancellor unveils new Job Support Scheme and extends self-employed grant

Here are the key announcements at a glance:

• The new Job Support Scheme will replace furlough, start on 1 November 2020 and last six months. To qualify, employees must work at least a third of their normal hours, for which they'll be paid in full by their employer. For 'normal hours' they don't work, the cost will be split three ways – the state pays a third, the employer pays a third and the employee loses a third. See full Job Support Scheme info.

• The Self-Employment Income Support Scheme has been extended for six months, with a third and fourth grant to be made available. Though the third grant, for November 2020 to January 2021, is at a much lower level than the previous grants – those eligible will get 20% of their average trading profits, capped at £1,875. We don't yet have details for the fourth. See full self-employed support info.

• Self-assessment taxpayers can now delay payments further. Tax due by 31 January 2021 can now be paid over the following 12 months instead. See tax payments deferred.

• Businesses have been given longer to repay bounce back loans. New and existing loans can now be repaid over 10 years, with payment holidays and interest-only repayment periods also available. See bounce back loans extension. 

For full help on all the support available to those struggling due to coronavirus, see our Employees' Help, Self-Employed & Small Limited Co Help and Universal Credit & Benefits guides.

What the changes mean for you – Martin's video explainer

For a quick overview of how the Government's new package of measures will work, you can watch Martin explain, courtesy of ITV's The Martin Lewis Money Show.

How will the new Job Support Scheme work?

The Government is creating the new Job Support Scheme to help protect "viable" employees' jobs after the current furlough scheme ends on 31 October 2020. Here's what you need to know:

• The Job Support Scheme starts on 1 November 2020. It will run for six months – the Government hasn't yet said when employers will have to apply to take part, or how much notice employees must be given, but it'll publish more guidance in due course.

• To qualify for the scheme, you must work at least a third of your normal hours. You'll be paid in full for this by your employer for that time.

• For the hours employees can't work, the cost is usually split THREE ways – and the state's contribution is capped at just under £700/month. Here the state pays a third, your employer pays a third and you lose a third, but the state won't pay more than £697.92/mth. (If the state's contribution is capped, it's unclear if the employer's contribution will also be capped – the Government has said it'll publish further guidance on this in due course.)

  What all this means in practice is:

  - If you're NOT affected by the cap – by our calculations, that'll usually be if you earn less than £38,000/year – then if you're on the Job Support Scheme and so working at least a third of your hours, you should get at least 77% of your usual pay – 55% paid for by your employer, 22% by the Government. See the table below for how this changes if you work longer hours.

  - If you ARE affected by the cap, you could get less than the 77% – though how much less will depend not only on how much you earn, but whether employers' contributions are also capped.

  The Treasury has confirmed that the state WON'T cover employers' national insurance or pension contributions for staff who are being paid through the scheme. The Government says NI and pension contributions will remain payable by the employer, though we're checking exactly what this means the employer must cover.

• The scheme's open to many – but not all employers can take part. It's UK-wide. All small and medium-sized businesses are eligible (the Government hasn't given a precise definition for this, but the usual definition of a 'small and medium enterprise' is one which has at least two of the following – turnover of less than £25 million, under 250 employees and gross assets of less than £12.5 million). Larger businesses can take part, but must prove they've been adversely affected by coronavirus and can't pay dividends while using the scheme.

  Employers can take part regardless of whether they used the furlough scheme – those retaining furloughed staff on shorter hours can be part of the scheme and still get the job retention bonus announced earlier this summer. Employees cannot be on a redundancy notice while taking part.

• To be eligible, you must have been on your employer's PAYE payroll on or before 23 September 2020. That's the key cut-off date.

• Those on zero-hours contracts and irregular hours WILL be eligible. The Government says there will be "calculations for those with variable working patterns", but it's not yet given details – it says it'll publish guidance in due course.

• You can go on and off the scheme. The Government says employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short-term working arrangement must cover a minimum period of seven days. 

How will the new self-employed grants work?

The Chancellor also announced that the current Self-Employment Income Support Scheme (SEISS) will be extended, though – initially at least – at a much lower level than before:

• The extension will start in November and last six months – with two new taxable grants (the scheme's third and fourth) available. The third SEISS grant will cover the period from the start of November to the end of January, and the fourth covers the start of February until the end of April. We don't yet know when applications will open or when money will start reaching people's bank accounts – the Government says this'll be confirmed in due course.

• The third grant will cover 20% of trading profits for three months, capped at £1,875. It'll be paid in a single instalment. The level of the fourth grant has yet to be set – the Government says this will happen "in due course".

  As with the SEISS currently, the third and fourth grants will be based on your profits calculated over three tax years. This is calculated from an average of the tax returns for 2016/17, 2017/18 and 2018/19. If you did not trade in 2016/17, it's based on the average of 2017/18 and 2018/19. If you did not trade in 2017/18, the amount is based on 2018/19 only – even if you traded in 2016/17.

• Crucially, ONLY those eligible for the current SEISS can apply. So you must have filed a tax return for 2018/19, must earn more than 50% of your total income from self-employment and your average trading profit must be no more than £50,000/year. See the current full SEISS eligibility requirements.

  It's worth noting that the Government has reserved the right to adjust the eligibility criteria for the fourth grant "to respond to changing circumstances".

• You need to have been adversely affected by coronavirus to claim. This is a requirement of the current SEISS. If you're unsure what "adversely affected" means, it could be, say, a reduction in trade, staff illness or extra PPE costs – we've detailed examples and help. 

  However, it's not immediately clear over exactly what period you'll need to have been adversely affected in order to be eligible for each grant. We're checking this with the Treasury and will update this story when we hear back.

Self-assessment taxpayers can now delay payments further

The self-employed and others who do self-assessment tax returns had already been given more time to pay taxes due, with those struggling to pay what was due by 31 July 2020 able to defer until 31 January 2021.

Now the Government has extended that further. It says those who are due to pay up to £30,000 in tax by 31 January 2021 will be able to use HMRC's 'Time to Pay' service to pay over an additional 12 months, meaning they won't need to pay in full until January 2022. We're checking more details of how this will work in practice and will update this story when we hear back.

Businesses given longer to repay bounce back loans

More than 1.17 million bounce back loans have been issued to struggling businesses since the scheme launched in May. These are 100% state-backed loans worth up to £50,000, with no interest charged or repayments needed in the first 12 months – see full info in our Bounce Back Loans guide.

The Government today announced that a new 'Pay As You Grow' Scheme will give those who've borrowed bounce back loans more flexibility in how they repay, while the time you have to apply for a new bounce back loan has also been extended. Here are the main points:

• New AND existing bounce back loans can now be repaid over 10 years (previously it was six). This will reduce average monthly repayments on the loan by almost half – though if you do extend the loan, you'll end up paying more in interest overall. The first year is interest-free and the rest is at 2.5%.

• You can now take payment holidays and interest-only repayment periods on bounce back loans. Again, this applies to new and existing loans.

  You can use the option to move temporarily to interest-only payments up to three times, with each interest-only period lasting up to six months. And you can take one payment holiday over the length of the loan, where you pause repayments entirely for up to six months. You can only use this option once you have made at least six payments. Remember, you'll end up paying more in interest overall if you use one of these options.

• You now have until 30 November 2020 to apply for a new bounce back loan. The deadline was originally 4 November 2020, but this has been extended.

Other measures to help businesses – including VAT deferral

The Chancellor also announced several other measures to help struggling businesses:

• Other temporary loan schemes aimed at helping businesses will also be extended. Businesses now have until 30 November 2020 to apply for the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme and the Future Fund. See more on how these work in our Coronavirus Self-Employed & Small Limited Company Help guide. Lenders taking part in the Coronavirus Business Interruption Loan Scheme will now also be able to extend the term of a loan up to 10 years.

• Business can delay VAT payments under the 'New Payment Scheme'. Over 500,000 businesses chose to defer paying VAT due between March and June 2020. Rather than paying in full by March 2021, they will now be able to spread payments throughout the 2021/22 financial year.

• A temporary VAT reduction for the hospitality and tourism sectors will be extended. The current lower 5% rate was supposed to revert to the usual 20% on 12 January 2021 – that's now delayed to 31 March 2021.