Coronavirus: Five deadlines you need to be aware of as furlough scheme ends

UK’s chancellor of the exchequer Rishi Sunak announced new measures to support businesses and employees hit by Tier 2 local lockdown restrictions on Thursday.

Sunak told parliament that hospitality businesses in Tier 2 areas would be eligible for new grants. The chancellor also announced more generous support for jobs across the UK and doubled grants for the self employed.

However, the government’s latest announcement to help workers and businesses comes as five key coronavirus support schemes come to an end on 31 October. This may impact millions of people and threatens to leave the public “reeling from the horror,” according to Sarah Coles, personal finance analyst at Hargreaves Lansdown (HL.L).

The five schemes are:

1. Furlough ends

The furlough scheme will come to an e(nd and be replaced by the Job Support scheme. Employees who work at least a third of their hours will receive full pay them. For the time they aren’t working, a third of the rest of their wages will be paid by the employer and a third by the government. For an employee working a third of their hours, employers will pay 55% of wages and the government 22%. This means an end to support for those who cannot return to work at all, and for those whose employers are not prepared to pay for more hours than people work.

2. End to free overdrafts

From 31 October, banks will no longer be forced to offer a £500 free overdraft. It will be subject to their usual charges – which can be 40% or more.

3. Deadline for applying for a mortgage holiday

People struggling because of the COVID-19 crisis have been able to defer mortgage payments. Initially, this was for three months, but the FCA (Financial Conduct Authority) agreed that anyone coming to the end of a first deferral and still struggling could take a second break. Interest would roll up throughout any mortgage holidays.

At the end of a second break, no more blanket deferrals were on offer, but those who were still unable to pay were encouraged to make individual arrangements with their mortgage company – although it would affect their credit rating. Payment deferrals can be requested any time before the deadline.

WATCH: Chancellor announces financial help for Tier 2 businesses

4. Deadline for applying for help with other borrowing

Anyone struggling with loans, credit cards or most other debts could apply for a three month payment freeze. At the end of the first freeze, they could apply for a second. If they were still struggling at that point, they would need to find separate arrangements with their lender, which would affect their credit score. Interest would also continue to mount. You can apply to take a payment break any time up to the deadline.

For high cost short-term loans, similar to payday loans, interest was further paused during the freeze, but was limited to one month. It can also be taken any time up to 31 October.

5. End to free childcare

The usual rules require parents to earn at least the equivalent of 16 hours at minimum wage a week to qualify for the 30 hours of free nursery care. During the crisis, if your working hours or pay fell because of the virus, you were able to continue to claim – as long as you still had a job. From 31 October, the old rules will apply again, so those whose work has not recovered will lose this free childcare.

The date marks the end of the furlough scheme, which will be replaced by the Job Support scheme. Several other programmes come to an end, including free £500 overdrafts, mortgage-free holidays, help with other borrowing and the end of 30 hours of free nursery care.

READ MORE: UK businesses in Tier 2 lockdowns get extra government support

“Almost one in 10 workers are still furloughed, and for many of them the end of the scheme brings horrible insecurity, said Coles. “Meanwhile, millions of people have fallen back on payment deferrals and mortgage holidays to make ends meet through the crisis and now have to pick up the pieces of higher monthly payments or longer deals. And anyone relying on a free overdraft, will suddenly find themselves paying up to 40% on their debts.

With these programmes coming to a close, she advises the public to protect itself.

“If you’re worried about paying debts, you can apply for a deferral before the deadline,” she said.

“If you miss it, you can still speak to your lenders. The official coronavirus help may be coming to an end, but the FCA expects banks to work with people to try to find a sensible solution. If you are using your free overdraft, don’t just fall into paying through the nose for it. You should switch to a cheaper form of borrowing, and make a plan to pay it down as quickly as possible.”

Taking proactive steps on the job hunt is also key, she added.

“Vacancies are certainly much thinner on the ground, and competition is fierce, but employers are still recruiting, so it’s worth getting your CV up-to-date and signing up to job hunting websites – so you’ll be the first to hear about any opportunities, Coles said.

The latest coronavirus support scheme announced on Thursday includes support for part-time workers, the self employed, and hospitality businesses that have been hard hit by looming restrictions.

The business community has largely hailed Sunak’s package of support, with Adam Marshall, director general of the British Chamber of Commerce, calling it “a very significant improvement” that would “go some way to alleviating pressure” on companies.

WATCH: How the furlough scheme is changing?