Martin Lewis explains the furlough extension

Since March the Coronavirus Job Retention furlough scheme and the later Self Employment Income Support grant have supported millions across the UK. This Friday operational details on how the extension to those schemes will work are being announced, but here’s our Money Saving Expert with what he knows so far.

Officially called the Coronavirus Job Retention Scheme, it allows firms to put employees on furlough – like a ‘stand by’ mode and the state covers 80% of your salary, up to £2,500/mth. The employer can also choose to top up the salary to 100% but it doesn’t have to. For full details of how it works, including Q&As see Martin’s full Coronavirus Job Retention Scheme guide.

The scheme has indeed been extended until October, but while employees must still receive at least 80% of their salary, from August employers will be asked to start to pay - at first just covering national insurance and pension contribution costs. But each month more is added, until by October - the final month of furlough - they pay 20% of salaries towards furlough.

Sadly, that means if firms think they can't or won't keep their furloughed staff on their books from November, they're likely to start redundancy processes soon, so people leave at or after the end of July, before firms have to contribute.

Will people be able to work for their employer while on furlough?Yes, that’s the other big change. From 1 July, you’ll be able to work part time for your employer, and your employer will pay your usual wage for any hours that you’re working, and the state will cover the rest up to 80%.

For example, let's assume you work a 40-hour week, and you earn £1,000/mth. On furlough you get £800 a month (80% of £1,000). If you went back to work for 10 hours a week you'd earn £250/mth for the work you do (quarter of your time). Yet you're still furloughed for 30 hours/week, so you get three quarters of your monthly furlough pay – that's £600. So, in total, you’d earn £850 a month working those 10 hours, compared with £800 on full furlough.

There's no limit on the number of hours you can work. If you work 40hr/wk, your employer can get you to work 39 hours and then furlough you for the remaining hour. The amount of time you work is likely to be variable week by week.

And what’s news for the self-employed?The Chancellor has said there will be a second (and crucially 'final' grant) for eligible self-employed people affected by coronavirus to cover June to August. Full technical details on Friday, but we know it’ll be available to apply for from August but this time it’ll be a lower 70% of average monthly trading profits capped at £2,190/mth.

The eligibility criteria are the same for both grants (you don't need to have claimed the first grant to receive the second grant), which will disappoint many who were excluded including new self-employed, those who earn over £50,000 of profits and limited company directors. Yet still millions are available.

This is something I, and others, have been pushing hard for, once it was announced furlough would last until October. Even though the amount is at a slightly lower rate than the first, I'm delighted to see it happen, as at one stage chances were no better than 50-50.

If people haven’t applied for the first grant can they still do it?Yes, and there’s currently around 1million self-employed who are eligible for the first grant who still haven’t applied. Some of those may have made an ethical choice that they don’t need help, or haven’t been affected. Yet the deadline is 13 July and from contacts I’ve had many may be wrongly thinking they shouldn’t claim, so let me quickly clear those up…

- You have always been able to carry on working if you're self-employed and claim the grant.

- Don’t overly worry about declaring 'I'm impacted by Covid-19' – unless you're deliberately defrauding, there's no claw back - just be honest. You can say you’ve been impacted by Covid-19 if one or more of these apply (or something similar)... a) you or a staff member's been unable to work/work normally, b) your work premises have been closed/had reduced access, or c) you've seen a decrease in demand/work level.

- If you’ve not been contacted by HMRC, there’s a chance for some, the details will be wrong or HMRC’s phone/text/post or email hasn't made it to you. If so, you can check via the HMRC eligibility checker.