The Isle of Man's 2023-24 budget published earlier today involves drawing from government reserves by nearly £153m to support public expenditure.
This decision, according to Treasury Minister Dr. Alex Allinson, is aimed at avoiding service cuts, especially amidst high inflation rates affecting essentials like energy.
The budget allocation sees significant increases for the Department of Health and Social Care (£20.54m), Education, Sport and Culture (£11.52m), Infrastructure (£4.66m), and Home Affairs (£2.16m). Despite this, the government projects a small net surplus of £0.9m, with total revenue expenditure post-reserves at £1.204bn against a forecast income of just under £1.205bn.
The use of reserves, while substantial this year, is part of a strategy expected to reduce as the economy grows, with plans to reassess halfway through the financial year.
A key point for our customers is the first increase in the personal tax rate since 2010 which has seen the higher rate of Income Tax jumping from 20% to 22%. Other points of note:
- The Income Tax personal allowance will remain at £14,500 for an individual resident and £29,000 for a jointly assessed couple
- The Income Tax lower rate for individuals will remain at 10%
- The threshold at which the higher rate of Income Tax becomes payable will remain at £6,500 for an individual and £13,000 for a jointly assessed couple
- For higher earners the personal allowance will continue to be reduced by £1 for every £2 that a person’s total income is above £100,000 (or £200,000 for jointly assessed couples) meaning that if a person’s total income is £129,000 (£258,000 for jointly assessed couples), or above, their personal allowance will be zero
- A tax rate increase from 10 to 15% for certain banking businesses and large retailers will also be introduced for this tax year only. The 15 percent rate will only apply to those whose profits would otherwise be subject to a top-up tax outside the Island under the OECD’s Pillar 2 Global Minimum Tax initiative
- Corporate taxpayers, in receipt of income from petroleum extraction on the Isle of Man and its territorial sea, will be subject to a Petroleum Extraction Tax rate of 20% from April
- A new benefit-in-kind calculation for cars provided by an employer to an employee for private use will be primarily based on CO2 emissions and the list price of the vehicle. The benefit in kind calculation, in respect of fuel, will also be aligned with the car’s emissions
- Certain National Insurance thresholds have also been raised with Class 1 being increased by 10%
- A continuation of the triple-lock arrangement for retirement pensions will see the basic state pension and Manx state pension to rise by 8.5%. Maternity, paternity and adoption allowance is set to be uplifted by 15%, with a further boost to those with two or more children as the child benefit rate is equalised for them all
- Other benefits, including employed persons allowance and income support, are to increase by between 5.7% and 6.7% in line with either the Isle of Man or UK's rate of inflation.
Dr Allinson said he was "determined" to make sure people saw the benefits of "extra investment in terms of key services" over the next year. He added "The days where the Isle of Man was sold as a low tax jurisdiction are sadly gone".
Edgewater Managing Director, Richard Taylor commented "today's budget announcement, with its strategic use of nearly £153m in government reserves, underscores a decisive action to protect and prioritise public services amidst economic uncertainties. This move, aimed at avoiding service cuts, reflects a deep commitment to maintaining the quality of life for Isle of Man residents. In particular, Dr Allinson’s commitment to ring-fence the increase in higher level income tax for improvement in frontline healthcare will benefit us all. It's a balancing act of fiscal responsibility and social stewardship, demonstrating the government's forward-looking approach to navigating challenging times while laying a foundation for sustainable growth and stability".
Further information on today's announcement can be found here
We encourage our customers to fully understand what these changes may make to their personal requirements. The budget also serves as a timely reminder to clients who are yet to top up their pension allowance for this tax year that time is running out. Should you need assistance, please do not hesitate to contact your financial adviser.