By Roy Callow, Senior Tax Consultant, Equiom Tax Services
The Honourable Alf Cannan MHK, Minister for the Isle of Man Government Treasury, presented his fourth budget on Tuesday 18 February. He described it as ‘A Budget of Focus’. He made the point that the Isle of Man Government must remain financially responsible while recognising the monetary pressures that many people and families are experiencing.
There was a substantial amount of comment in the budget regarding spending proposals but this article will concentrate on the tax and National Insurance (NI) changes.
Thanks to disproportionate increases in the lower NI threshold (the point of earning at which NI becomes payable) and the upper limit (at which the full rate of NI stops being paid), those earning from £6,500 to £41,444 per annum will benefit from reductions in their NI contributions of up to £74 per annum but those earning more than £41,444 per annum will see an increase in NI charges of up to £135 per annum.
The NI holiday scheme for those moving to the Island to take up employment has been extended for another year. This allows employees to get most, if not all of their first year’s NI back. The scheme also applies to students returning to live in the Isle of Man.
There are no changes to the tax rates for individuals and companies.
The personal allowance for individuals, being the amount which is income tax free, has increased by £250 to £14,250 per person and double that for jointly assessed married couples. This means for those on less than £40,768 they gain both on the National Insurance change and the tax change. However those earning more than £41,694 per annum will end up with a little less take home pay.
The other tax incentive to try and attract employees to the Island is the ‘Key Employee Concession’. If an employee qualifies for this they can be treated as non-resident for Isle of Man tax purposes for three years, providing them with the opportunity to receive non-Manx income, investment income and non-Manx rental income free of Isle of Man tax. The individual and the business/employment must meet certain criteria to avail of the legislation.
The tax cap amount had already been set as £200,000 (£400,000 for married couples) per annum with effect from 2020/21. However, those electing now have a choice whether to fix the amount for 5 years or 10 years. Previously, the election had been set at 5 years.
Contact Roy Callow for further information on the topics discussed in this article.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.