Moving to the Isle of Man – Considerations for High Net Worth Individuals

If you are considering a move from the United Kingdom to the Isle of Man, whether borne out of tax considerations, a new role or simply looking for a lifestyle change, then there are several potential tax issues that should be addressed in advance of a move.

Establishing Isle of Man Tax Residency

Establishing tax residency in the Isle of Man is straightforward: if you physically move to the Isle of Man with a “view or intent of establishing residence”, then you will be tax resident from the date of your arrival.  If there is any doubt as to the intent, then there are two day count tests designed to resolve the matter; an individual will be Isle of Man tax resident if they spend:

• more than six months in the Isle of Man in any tax year, or
• more than 90 days per tax year on average over any four consecutive tax years

However, the real tax issue to address for many UK expatriates who make the move to the Isle of Man is breaking their UK tax residence.  This is because, more often than not, there will be an inclination or a need to at least visit the UK from time to time for personal or work-related reasons. 

The UK tax residence position for an individual is determined under prescriptive rules within the Statutory Residence Test, and all new UK emigrees should ensure that they are fully appraised of these rules and know precisely the limit on their visits in any particular tax year.

The Isle of Man Tax System

The Isle of Man tax system is relatively straightforward compared to the regime in the UK.  Isle of Man resident individuals are subject to income tax on their worldwide income from the date that they become Isle of Man tax resident.

The Isle of Man’s personal tax system represents an attractive proposition for those seeking to relocate from the UK.  The top rate of personal income tax is just 22% which, when coupled with a generous tax-free personal allowance of £14,500 and a lower rate of income tax at 10% on the first £6,500 of taxable income, represents a competitive, low income tax environment.

Furthermore, there are no capital taxes in the Isle of Man -capital gains tax (‘CGT’) and inheritance tax (‘IHT’) - which makes a move to the Island all the more appealing.

You may still be within the scope of UK taxes after your departure from the UK, including income tax and CGT, depending upon the nature and location of any assets held or sold, and the source of certain types of income received.  However, the principal concern of clients in our experience tends to be a continuing exposure to IHT after their departure from the UK. 

UK Businesses

Clients often have the perception that their UK businesses, almost invariably in the form of UK incorporated companies, might prove to be problematic from a tax perspective on a move to the Isle of Man.  But this is not necessarily the case; there are several courses of action that can be considered in order to improve the overall tax exposure between the UK and the Isle of Man. 

How that overall tax exposures might be improved will depend upon the precise circumstances of each case, which might include consideration of such matters as:

• the percentage ownership of the company, whether a majority or minority interest;
• whether the company can be operated remotely, from outside the UK; and
• whether the company has a fixed place of business in the UK, with an office and employees, for example

Restructuring your business interests can prove to be beneficial, with a number of strategies that can be employed.  For example, it may be helpful to migrate the company’s tax residence under the central management and control test and consider the application of the double tax agreement between the UK and Isle of Man.   

There are further tax benefits to bringing a business to the Isle of Man, specific measures that are designed to encourage employees and entrepreneurs, most notably:

• the Key Employee Concession – a concessional treatment awarded on application to the Income Tax Division, which restricts a new resident’s exposure to Isle of Man income tax for their first three tax years of residence;
• relocation relief for certain expenses incurred by employees and their employer on an employee’s relocation to the Isle of Man; and
• a National Insurance Holiday Scheme for employees, which offers a refund of the first year’s Class 1 contributions

Isle of Man Personal Taxation

Income tax liabilities should be significantly less than those experienced in the UK for individuals with higher annual income levels.  If the level of annual taxable income warrants it, an election to be tax capped could be even more favourable, reducing the effective tax rate suffered to below the standard income tax rates.

Under a tax capping election, liability to Isle of Man income tax is fixed at an amount of £200,000 per annum for a period of five tax years, or 10 tax years if you wish to commit further.  The election is beneficial if likely taxable income levels exceed approximately £1m per annum over a five year period.

If you hold significant wealth in the form of passive investments, such as portfolio investments, or you intend to invest significant amounts of cash into stocks and shares, then there is scope to defer or limit your Isle of Man income tax liability. 

Isle of Man investment holding companies, for example, can provide for the long-term deferral of income tax liabilities, although there are other options that might limit tax liabilities even further for long-term residents.

UK real estate investment is a different issue, whether you are directly invested in UK property or hold it via an Isle of Man property-holding company.  The tax landscape in this area has changed significantly over the last decade, and specialist taxation advice should be sought because UK real property continues to remain within the scope of all four relevant UK taxes – income tax, CGT, IHT and Stamp Duty Land Tax - for non-UK resident property owners.

There are certain other types of investment that might be considered by Isle of Man residents, which could provide both Isle of Man and UK income tax deferral or mitigation and, in certain cases IHT protection whilst you continue to be within the scope of IHT.

UK Pension Schemes

You may have built up a pension fund in the UK, perhaps within a company scheme or your own private arrangement via a Self-Invested Personal Pension (‘SIPP’).  There is the option to transfer a pension fund to a new Isle of Man SIPP for new residents, providing you have not already accessed funds from your UK scheme.  This simplifies matters and allows a withdrawal of a tax-free lump sum of up to 30% of the fund value when you decide to take benefits.

If you have already accessed your UK pension fund, then there are administrative tasks to complete when you move to the Isle of Man, to ensure that any future pension receipts are subject to income tax in the Isle of Man only, and not the UK.

Capital Taxes & UK Taxation

As already noted, there are no capital taxes in the Isle of Man.  However, the scope of UK CGT and IHT are such that these taxes must be considered after your departure from the UK.  For example, the following issues might arise:

• how to mitigate CGT on any chargeable assets that you sell after your departure from the UK;
• specific CGT issues relating to direct and indirect ownership of UK real property;
• the years of Isle of Man tax residence required to escape the extra-territorial scope of CGT for temporarily non-UK resident individuals; and
• establishing an Isle of Man domicile, managing your UK deemed domicile position and, from 6th April 2025, consideration of the proposed new UK residence-based tests.  
• There are certain courses of action that might be considered in reducing your ongoing exposures to these taxes in the interim period, before you are completely outside the territorial scope of these taxes.

In the longer term, trust arrangements might be considered, once any IHT issues have been addressed.  Trusts can provide long-term protection of assets, security against younger beneficiaries’ potential profligacy, and real tax benefits if your children continue to reside in the UK. 

If you are considering relocating to the Isle of Man and need guidance and support tailored to your specific needs please contact our tax specialists. 

This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. This article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained within this article without obtaining specific professional advice. Please contact Equiom Group 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.