Universal Credit to increase £1000 a year and Government to pay 80% of your wage

Ordinary Brits are set to benefit from a £7billion welfare support package with Universal Credit increasing by £1,000 a year as part of the 'unprecedented' emergency coronavirus action being taken by the Government.

As thousands are left without work or facing uncertain times, Chancellor Rishi Sunak is increasing working tax credits and housing benefit.

While welfare claimant rules will be relaxed for the self-employed.

Last night two of the biggest announcements ever made since the Second World War came from the Government.

Boris Johnson ordered every very single bar, pub, club, cafe, restaurant, theatre, cinema, gym and leisure centre throughout the UK to close.

Then the Chancellor, Rishi Sunak, unveiled an extraordinary bailout for workers that will effectively "freeze" millions of people's jobs during the  coronavirus  crisis.

It will pay 80% of workers' wages up to a cap of £2,500 a month – though zero-hour workers could lose out and the self-employed are excluded.

Following criticism that the Chancellor’s £350 billion bail-out earlier this week was focused on businesses but not on workers, he said the latest measures would help ‘four million of the most vulnerable households’.

Alongside the rise in benefits payments, Sunak said the minimum income floor for the self employed would be scrapped so that they can claim Universal Credit.

''I'm strengthening the safety net for self-employed people too by suspending the minimum income floor for everyone affected by the economic impact of coronavirus,” he said.

''That means that self-employed people can now access, in full, Universal Credit at a rate equivalent to statutory sick pay for employees.”

The Chancellor admitted: "I cannot promise you that no-one will face hardship in the weeks ahead."

In the blizzard of announcements there are things that will have a real impact on you, and your family.

Here is as simple and clear an explanation as we can muster of what tonight's economic measures – which are all UK-wide – mean for you.

If you're a full- or part-time worker

Government grants will pay firms up to 80% of each worker's wage, up to a cap of £2,500 a month (close to the median salary), if their income is hit by the coronavirus.

The "coronavirus job retention scheme" has been set up to stop firms laying off workers they can't afford to keep.

This will essentially keep low-waged workers in pubs, cafes, nightclubs and leisure centres on close to full pay for the duration of the crisis.

Even though they can't do any actual work due to the shutdown, they will be kept "dormant" on the company payroll, ready to come back when restrictions are lifted.

“Any employer in the country, small or large, charitable or non-profit, will be eligible for the scheme,” Chancellor Rishi Sunak said.

It will cover the cost of wages backdated to March 1 and be open initially for “at least” three months. The Chancellor said he will extend the scheme for longer if necessary.

Firms already affected can use the scheme, raising the suggestion they could hire back workers already laid off.

But it is not conditional on firms making up the rest of the wage cost. So because it only funds up to 80% of wages, workers may find themselves forced to take a pay cut.

Chancellor Rishi Sunak merely said firms can pay the difference "if they choose to".

Firms will have to apply to HM Revenue and Customs for the grants, and there is “no limit” on the amount of money payable through the scheme.

The employee retention scheme may only be up and running by the end of April, which is almost six weeks away.

In order to tide flailing businesses over in the meantime, all firms in the UK will get a VAT holiday from next week.

Any VAT payments incurred between now and the end of June will be deferred and only need to be paid at the end of the tax year.

Chancellor Rishi Sunak said that it represented a direct cash injection of more than £30 billion – equivalent to 1.5% of GDP – and firms wouldn't have to pay up until the end of the financial year.

He also announced the new £5m-per-firm business interruption loan scheme – announced at last week’s Budget to deal with coronavirus – will be interest-free for 12 months.

If you're on a zero-hour contract

The coronavirus job retention scheme (above) should be open to workers on zero-hour contracts – but it raises questions over how their "wage" is calculated.

Officials said zero-hour workers will mainly have their "wage" decided on the basis of what they earned in February.

This means you will be well-compensated if you had a good month in February, but could be forced to claim  Universal Credit  if February was a very thin month.

Chancellor Rishi Sunak said the employee retention scheme will cover "everybody who is on the PAYE system through a company."

Asked about zero-hour workers, he said: "We will be publishing detailed guidance shortly. Depending on your particular employment contract it might be different depending on who you are.

“Zero hours covers a variety of situations, but it may well be you are on a PAYE scheme and have a set of regular earnings and it will be covered depending on your particular circumstance.

“I can’t generalise for every single person’s employment status, but in general our desire here is to cover as broad a range of people as possible.” 

If you're self-employed

 

Self-employed people will not be eligible for the coronavirus job retention scheme. They are also not eligible for Statutory Sick Pay, angering campaigners.

Instead self-employed people will need to claim Universal Credit.

Those claiming Universal Credit for the first time will need to wait five weeks for their first payment, and must borrow an advance repaid from future benefits over 12 months if they want to bridge the gap.

To compensate for this, the government is making Universal Credit more generous for self-employed people in two ways.

First, the Minimum Income Floor – which ensures self-employed people can never get more benefits than if they were on the minimum wage – will be suspended.

This means self-employed people with zero income can claim Universal Credit in the same way as someone who's unemployed.

Secondly, Universal Credit will be made £1,000 a year more generous. This will mean the "standard allowance" for a single person will, from next month, be almost exactly the same as the £94.25-a-week rate of Statutory Sick Pay.

Put together, these two measures basically mean self-employed people can claim sick pay. But under a different name, and it takes much longer to arrive.

Lastly, the Chancellor said the next self-assessment tax payments will be deferred to January 2021 to further support the self-employed.

If you're on Universal Credit

 

The "standard allowance" of Universal Credit – before any additions for children, housing costs and the like – will be raised by £1,040 a year (£20 a week) for the next 12 months.

The "standard allowance" – £323.22 a month for single people and £507.37 a month for couples – will be raised for the next 12 months.

It will now instead be just over £400 a month for single people and just shy of £600 a month for couples.

The change takes effect from April 6 and will apply to everyone on Universal Credit.

It's worth noting that if you are earning a wage alongside claiming benefits, you won't benefit by £1,040 a year because some of your Universal Credit will be "tapered" away the more you earn. 

If you're on Tax Credits and housing benefit

Working Tax Credit will also be raised by £1,040 a year (£20 a week), the same rate as Universal Credit.

Housing benefit (and the housing element of Universal Credit) will also be increased for some.

Currently, the "Local Housing Allowance" – a complex formula that determines housing benefits – is set at either 30% of local market rents, or another previous rate.

Under changes announced by the Chancellor, all those allowances will be set at 30% of local market rents. Mr Sunak described this as a £1billion boost

If you keep your job as normal, but end up sick or having to self-isolate

As a minimum, you can claim Statutory Sick Pay of £94.25 per week from the first day you have to either self-isolate or go off sick.

This is paid by your company, but the first two weeks you are off work can be refunded to your firm by the government under changes announced in recent days.

For the purposes of sick pay, self-isolation in line with government advice should be treated exactly the same as if you are actually sick.

An "isolation note"  can be obtained online through NHS 111  in order to prove your absence to your employer.

Your company may have a more generous sick pay policy that you can claim instead.

But statutory sick pay does not apply to people who earn less than £118 per week or the self-employed, who are not eligible. They must claim Universal Credit instead.

How much will this all cost?

We don't know, because there is no upper limit on the amount that can be paid through the retention scheme.

The Chancellor said the changes to the benefit system would cost £7billion and the VAT holiday for businesses would cost £30billion. But the worker retention scheme will cost far, far more.

No. Tonight's announcement comes on top of a £350bn rescue package for business unveiled by the Chancellor earlier this week, and billions at last week's Budget.

The announcement earlier this week would, on its own, have been big enough to sail into the history books.

Now that tonight's announcement has been made too it can be guaranteed quite a big page in those books.

You can  click here  to read the announcements that were already made earlier in the week.

Private renters will also be  protected from eviction under all circumstances for three months,  but will still have to pay rent. Homeowners will be offered a three-month holiday from paying their mortgage.

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