The Treasury Minister, Hon Alex Allinson MHK, delivered his first Isle of Man Budget speech in Tynwald today.
With a backdrop of continued global economic uncertainty the income tax and National Insurance regimes have been left largely untouched, albeit longer-term developments in both areas were signposted.
The main immediate tax change announced was the tapering of personal allowances for those with higher incomes, which will come into force from 6 April 2023. This will work by reducing the amount of personal allowance entitlement by £1 for every £2 of total income over £100,000, for individuals, and £200,000 for jointly assessed couples, respectively. The effect of this is that individuals with annual income over £129,000 and jointly assessed couples with annual income in excess of £258,000 will see their personal allowance reduced to nil.
The longer-term picture is likely to be one of more significant change. Firstly, the Treasury has confirmed its intention to conclude initial work on a new tax strategy before the end of 2023, which will be designed to establish the main themes that will guide tax policy formation for the remainder of the current administration. Secondly, it was announced that further details of the Island’s position in respect of the global minimum tax rate initiative (or “Pillar 2”) would be taken to Tynwald ahead of the summer recess. As a reminder, Pillar 2 is designed to ensure that the profits of large multinational groups (defined as those with annual turnover in excess of €750m) are subject to a corporate tax rate of at least 15%, irrespective of the jurisdiction in which those profits arise. The Isle of Man is considering the introduction of local rules consistent with this overall aim and is currently in the process of weighing up the available options.
Finally, reference was made in the Budget speech to a response issued recently by the Treasury in respect of its consultation on proposed changes to the National Insurance system. It has been recognised for some time that there are disparities between the overall rates of contributions payable in respect of employees versus the self-employed or owner-managed businesses. The Treasury Minister reaffirmed the intention to address these matters albeit, owing to the complexity of this area (and the desire to consult further), draft legislation is not expected before the 2024/2025 tax year.
Further details in relation to the Budget can be found here.
If you have any questions in relation to the 2023 Isle of Man Budget, or any other tax matter, please don’t hesitate to contact us.
