The Treasury Minister, Dr Alex Allinson MHK, announced some of the most significant tax changes in recent years in yesterday’s 2024/25 Budget speech.
The change likely to attract widest interest is the increase – to 22% - of the top rate of personal income tax for both residents and non-residents with effect from 6 April 2024, the first such rate rise since the increase from 18% to 20% that took place with effect from 6 April 2010. This has been described as a temporary measure that will be replaced by a standalone annual “NHS levy”, possibly as soon as 2025/26. All other personal income tax rates and thresholds remain unchanged. Individuals will also continue to have the option to make a Tax Cap election for a five or ten year period with the maximum income tax liability for a tax-capped individual remaining at £200,000 and £400,000 for a jointly assessed couple.
The National Insurance system continues to be under review and, in particular, the treatment of dividends paid by “owner managed businesses” is an area in which we can expect changes to be made in the near future. For now, though, the changes with effect from 6 April 2024 are limited to increases to thresholds and limits, with the overall structure of the regime and rates remaining unchanged for the 2024/25 tax year. Perhaps most notably the upper earnings limit will increase with the effect that many wage earners will pay more (as much as £299 more) employees’ Class 1 national insurance contributions in 2024/25.
Changes to the Island’s “zero/ten” corporate income tax regime were also announced. The first is the temporary increase from 10% to 15% to the rate of tax applicable to profits from banking business and from “large” retail operations. This is essentially aimed at collecting Isle of Man corporate income tax in situations in which these profits would otherwise be subject to so-called “top-up tax” in other jurisdictions as a result of the global implementation of “Pillar 2” (otherwise known as the “global minimum tax rate initiative”). This will have effect for the 2024/25 tax year only. The other corporate income tax change is the introduction of a 20% rate on income from petroleum extraction activities with effect from 6 April 2024. The scope of this new tax will include the extraction of natural gas and sums received in relation to the disposal of petroleum extraction rights or interests deriving from such rights.
Changes to the calculation of benefits-in-kind in respect of the provision of cars and fuel were also announced, with the broad effect that the quantum of the benefits, for tax purposes, will shift from being based on cylinder capacity to being based on a combination of the value of the car and its emission levels.
Finally, the Treasury Minister referred in his Budget speech to a newly published “Tax Strategy” that will be presented for discussion to Tynwald next month. Amongst other things, this sets out a clear intention to retain the zero/ten system as well as a welcome commitment to not introducing any new taxes on capital gains or wealth.
Further details in relation to the Budget can be found here and the Treasury Minister’s Budget speech can be found here. The 2024-2026 Tax Strategy document can be found here.
If you have any questions in relation to the 2024 Isle of Man Budget, or any other tax matter, please don’t hesitate to contact us.
