Taxes

Taxes

Income tax

Last year’s increase to the higher rate of income tax has been halved.

In 2024 the treasury minister increased it from 20% to 22%.

This year, Alex Allinson is proposing to reduce it to 21%.

That extra 1% is still said to be ringfenced for healthcare.

Personal tax allowance

For the first time in three years, the personal tax allowance is expected to go up.

For individuals it will be £14,750 and for jointly assessed couples it will be £29,500.

How Income Tax works:

Everyone has a chunk of their income which they don't get taxed on, which is changing this year.

That means individuals can earn £14,750 and jointly assessed couples can earn £29,500 before paying any tax.

Income Tax is split into two parts - the lower rate and the higher rate.

The lower rate means everyone will on be taxed 10% of the next £6,500 they earn.

After that, any remaining earnings will now be taxed at 21%.

Essentially - if you are an individual earning £25,000 a year, you would only be taxed on £10,250.

Of that, for the first £6,500 you will be taxed the lower rate of 10% and for the remaining £3,750 you'll now be taxed 21%.

Tax Cap

The tax cap, which is the most tax an individual will pay, is being raised from £200,000 to £220,000 a year.

National Insurance contributions

Employed: 

Earners also pay National Insurance (NI), which goes into the National Insurance Fund covering things like the state pension and certain other welfare payments. 

This year, Treasury hopes there’s going to be protection for businesses with no increase in employer National Insurance contributions. 

There had been some concerns about whether the Island would follow in the footsteps of the UK by increasing this.  

The rates will remain at the current levels of 11% for employees and 12.8% for employers. 

If the Budget’s approved by Tynwald, the lower earnings limit will increase from £123 to £125 per week from April 2025. 

The Thresholds at which employees and employers will start to pay class 1 NIC will increase from £160 to £168 per week.

The upper earnings limit will see a 10% increase, rising from £938 to £1,032 a week, with anything over this continuing to be charged at 1%. 

Self-employed: 

For the next tax year, the plan is to retain the rates of class 4 NIC at 8% up to the upper profits limit and 1% for profits above that. 

The lower profits level, at which class 4 NIC becomes payable, will increase from £160 to £168 per week. 

The upper profits level will see a 10% increase, rising from £938 to £1,032 a week, with anything over this continuing to be charged at 1%.

You can hear the treasury minister announcing these measures in Tynwald below:

NI Holiday Scheme

Dr Allinson wants to change the National Insurance Holiday Scheme going forward.

It will continue for returning Manx students, but will no longer be available to new residents who start work here after 5 April 2025.

It’s hoped this will encourage more students from the Island to return once they’ve completed their studies in the UK.

Company Tax

The standard rate of tax applying to the income of companies remains at 0%, with the exception of income from:

• Banking business – 10%
• Retail Trade (subject to a small companies limit of £500,000) – 10%
• Land and property situated in the Isle of Man (development and rental income) – 20%
• Petroleum extraction in the Isle of Man and its territorial waters – 20%

Last year, certain banking businesses and large retailers faced a tax increase from 10 to 15%.

This was only intended to be in place for the 2024/25 financial year, so will now return to its previous level.