Taxation of individuals

Home About the Isle of Man Taxation of individuals

Income Tax


Income is taxable on either of two criteria:

  • Residence in the Isle of Man of the taxpayer - the taxpayer’s worldwide income is taxable.
  • Isle of Man source income arising or accruing to a non-resident of the Island.

An individual’s income tax liability can be capped at £125,000 for 2015/16 (£120,000 2014/15) or £250,000 for 2015/16 (£240,000 2014/15) in the case of a jointly assessed married couple. The increased tax cap amount of £125,000 (£250,000 for jointly assessed individuals) applies to new entrants into the scheme, and a "five year" election still exists.


Residency


In the virtual absence of legislation the residency rules are largely those set out in a practice note PN 144/07 issued by the Assessor of Income Tax in 2007. Broadly speaking the following apply:

The 183 day rule

If an individual is in the Island for six months or longer in any one tax year, he will be Isle of Man resident for that year.

The 91 day rule

If an individual moves to the Island with the intention of residing for more than an average of 91 days per year he will be resident from the first date of arrival. If the intention is not to reside for more than 91 days but that average is exceeded the individual will be considered to be Isle of Man resident for tax purposes from that date.

Note that the UK residency rules have recently changed and further details can be found in our publications section.

Temporary absentees are regarded as resident e.g. someone who goes to the UK for a year or two but returns after 18 months will be treated as Isle of Man resident for tax purposes.

 

Multiple Residency


It is possible to be resident in more than one jurisdiction. For example, someone spending five months in the UK, five months in the Isle of Man and two months on holiday will be resident in both jurisdictions for tax purposes. Although double taxation relief should be available in respect of income tax in each jurisdiction.

An individual’s gross income is subject to various reliefs and allowances. All resident taxpayers are entitled to a personal allowance. Each of a husband and wife is entitled to a personal allowance. The personal allowance of one member of a married couple may be wholly of partly transferred to the other member.

Since 6 April 2012, tax relief for certain general deductions is restricted to 10% for individuals. The general deductions affected are: interest paid on mortgages or loans, charitable donations or deeds of covenant, private medical insurance payments, nursing expenses and educational deeds of covenant entered into on or before 5 April 2011 and where the student is in qualifying full time education at that date. For tax years prior to 2012/13, general deductions were treated as reducing an individual’s taxable income and tax relief was therefore given at the individual’s effective rate of income tax. Since 6 April 2012, 10% tax relief for the affected general deductions will be treated as reducing an individual’s total liability.  Relief is allowed for contributions made to an approved pension scheme. Expenditure incurred wholly and exclusively for the purpose of a profession or trade is also allowable.


There are special rules dealing with the valuation (for income tax purposes) of benefits in kind, particularly cars provided by employers.

 

National Insurance Contributions


The rate varies according to whether the individual is employed or self employed.

 

Losses


The schedular system of income tax means that losses arising in one schedule must first be set against income arising in the same year in the same schedule. Any surplus losses may be carried forward and set against the first available profits of the same schedule in a subsequent tax year; losses may be carried forward until relieved in full.

 

Double Taxation Relief


The only double taxation agreement to which the Isle of Man is a party is with the United Kingdom: This provides that:

  • trading profits belonging to a resident of one territory are taxable there unless attributable to a permanent establishment in the other territory
  • profits from operating ships and aircraft by a resident of one territory are taxable there
  • certain personal services performed in a territory are exempt in that territory if performed by a resident of another territory for a resident of that other territory
  • in circumstances where there might otherwise be a liability to double taxation, which is possible in the case of dividend income and interest, relief may be allowed.

Recent negotiations between the Isle of Man and several countries has resulted in agreements in the areas of double taxation for individuals, companies and shipping and aircraft activities and have provided for various agreements on the exchange of information (in line with the OECD principles of effective exchange of information).  The following link provides a list of such International Agreements.


 

Please view our Manx Tax Guide 2015-16 for further information on the current Isle of Man tax information.