Isle of Man announces temporary 2% rise to top rate of personal income tax

The Isle of Man government announced, as part of the 2024-25 Budget delivered on 20 February, that the top rate of personal income tax for both residents and non-residents would be increased from 20% to 22% with effect from 6 April 2024.

The rate of income tax on taxable income for non-resident individuals and non-corporate entities will also increase from 20% to 22%.

The increase, the first since 2010, applies to earnings above £21,000. Treasury Minister Alex Allinson said the additional income generated by the increase – estimated to be worth up to £20 million – would be ‘ring-fenced’ for improvements to frontline health services.

He described it as a temporary measure that was likely to 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, or £400,000 for a jointly assessed couple.

The Budget included changes to the Island’s ‘zero/ten’ corporate income tax regime. The tax rate will increase from 10% to 15% for certain banking businesses and large retailers in respect of the 2024/25 tax year only.

In May 2023, the Isle of Man confirmed its intent to introduce the global minimum corporate tax rate of 15% for multinational enterprises under the OECD’s Pillar Two global minimum tax framework. The new 15% rate will only apply to banks and retailers whose profits would otherwise be subject to a top-up tax outside the Isle of Man. There is no impact to banks and large retailers who are not part of groups that are in scope of Pillar Two from 2024.

Corporate taxpayers in receipt of income from petroleum extraction in the Isle of Man and its territorial sea will become subject to tax at a rate of 20%, which is in line with the rates for land and property.