The furlough scheme has been extended until the end of April 2021, chancellor Rishi Sunak announced today.
Sunak also confirmed he would be extending the government-guaranteed Covid-19 business loan schemes until the end of March.
These changes come ahead of the Budget, which the chancellor has confirmed will take place on 3 March 2021, and which will deliver the next phase of the plan to tackle the virus and protect jobs.
Sunak said: "Our package of support for businesses and workers continues to be one of the most generous and effective in the world – helping our economy to recover and protecting livelihoods across the country.
"We know the premium businesses place on certainty, so it is right that we enable businesses to plan ahead regardless of the path the virus takes, which is why we're providing certainty and clarity by extending this support, as well as implementing our plan for jobs."
Business secretary Alok Sharma said: "While our loan schemes have provided a vital lifeline to millions of firms across the country, we know that business owners need additional certainty as we head into the New Year.
"Extending government-backed loan schemes will give companies right across the UK the finance they need to support, protect and create jobs as we build back better from the pandemic."
The chancellor said he would review the employer contribution element of the Coronavirus Job Retention Scheme (CJRS) in January, but decided to bring this forward to allow businesses to plan ahead for the remainder of the winter and the New Year.
The government will continue to pay 80% of the salary of employees for hours not worked until the end of April. Employers will be required to pay wages, National Insurance Contributions (NICS) and pensions for hours worked; and NICS and pensions for hours not worked.
The eligibility criteria for the UK-wide scheme will remain unchanged and these changes will continue to apply to all devolved administrations.
Businesses will also be given until the end of March to access the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, and the Coronavirus Large Business Interruption Loan Scheme, which had been due to close at the end of January.
The government has already announced that more support will be available beyond March through a successor loan scheme.
UKHospitality chief executive Kate Nicholls said: "The extension of the furlough scheme with full government contribution through to April and the longer period for applying for business loans are, of course, very welcome.
"However, with yet more of the country having been served notice of moving into tighter restrictions and 72,500 of Britain's 110,00 licensed premises unable to open and a further 12,500 wet led venues with little chance of reopening, more will be needed to safeguard jobs and businesses in a sector being seemingly singled out to bear the brunt of Covid measures. Without additional business support to accompany this extension, there will inevitably be more widespread business failures and job losses.
"The extended period for business loans applications is much appreciated but the sums available are insubstantial and eligibility rules are too narrow. Too many hospitality businesses will still be fighting for survival. To instil the business confidence necessary to plan for survival, we urge the government to commit to a business rates holiday to cover the period of 2021/22 and a VAT cut extension through to end of 2021. Such measures will give a vital lifeline to many businesses and enable them to play their role in the economy's recovery later in 2021."