What advisers should tell clients about the Summer Statement

Advisers and their clients should be thinking about the decisions they need to be taking in the light of Rishi Sunak’s Summer Statement – aka the mini-Budget.

The chancellor presented investors, businesses and employers generally with an agenda that they need to take seriously. Clients will want to discuss it all and advisers should be prepared, even if much of it is out of their usual scope.

The Summer Statement arrived on 8 July roughly halfway between the chancellor’s March Budget and his full Autumn Budget, when there will be even more spending plans and tax changes.

Government finances are in seriously deep deficit. In May this year, for the first time since 1963, total government debt exceeded 100 per cent of GDP the UK’s economic output for the whole year.

Should you be tempted back into the residential property market by the temporary cut in stamp duty?

Early signs are of hugely increased activity by residential property buyers mainly with the unwinding of the lockdown.

From 8 July 2020 to 31 March 2021, there is to be no stamp duty land tax on the first £500,000 slice of property value in England and Northern Ireland. This should take nine tenths of properties out of SDLT and create a tax saving of up to £15,000 on the rest, although the 3 per cent additional rate will still apply to second homes etc.

At the time of writing the rest of the UK home countries had not joined in – but it seems likely Wales and Scotland won’t be far behind with similar moves.

Whether the SDLT temporary cut should be taken as a seriously strong buying signal is a moot point. The saving is pretty small in overall percentage terms; the tax tail should not wag the investment dog.

Will the new green homes grant make spending on energy saving on homes and buy to let property worthwhile?

A resounding yes is the answer for most people – assuming there are no nasties in the small print of the scheme when it appears. The green homes grant will provide at least £2 for every £1 up to £5,000 per household to homeowners and landlords who spend on making their residential properties more energy efficient and it’s up to £10,000 for those on the lowest incomes.

For example, a homeowner installing a cavity wall and floor insulation costing £4,000, will only pay £1,320 and the government will then cover the remaining £2,680. But don’t spend the money till the new rules come out.

How should restaurant and accommodation businesses treat the temporary cut in VAT?

A reduced (5 per cent) rate of VAT will apply across the UK from 15 July 2020 to 12 January 2021 to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises. The cut will also apply to supplies of accommodation and admission to attractions like zoos.

Businesses in all these areas will have to decide whether they need to cut their prices to tempt the punters in or to keep their net prices to consumers more or less the same and try to rebuild their profitability.

Markets and businesses differ from each other and some may come under consumer and competitive pressure to cut their net prices, but those who can will aim to keep their prices up and try to rebuild their capital base.

Should employers take on new trainees and apprentices to get the new subsidies?

Employers with the capacity could find it worthwhile to provide effective training for people who will give value in the longer term.

In particular, the ‘kickstart scheme’ aims to provide six-month work placements for those aged 16-24, on universal credit and at risk of long-term unemployment. Government funding for each job will cover up to £6,500 for 100 per cent of the relevant national minimum wage for 25 hours a week plus the associated employer NICs and employer minimum auto-enrolment contributions.

Should employers retain employees who have been on furlough so they can claim the new job retention bonus?

The bonus is worth getting but it won’t cover all the costs of keeping an employee on furlough from August onwards or of employing them when the scheme comes to an end. So the decision should probably be based on whether the business can afford to keep the employee without the bonus and regard the extra sum of money as welcome assistance.

The job retention bonus will provide a one-off payment of £1,000 to UK employers for every previously furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn more than £520 per month on average between the end of the furlough scheme and the end of January 2021.

Maybe brave advisers could consider taking clients out to restaurants early in the weeks of August to take advantage of the £10 per diner subsidy on food and soft drinks. A possible topic for conversation might be the upcoming tax increases to help pay for all this largesse.

Danby Bloch is chairman of Helm Godfrey and head of editorial strategy at Platforum