Moving to the Isle of Man - Manx tax issues

Home Publications Moving to the Isle of Man - Manx tax issues

Manx tax issues of moving to the Isle of Man

The Isle of Man (IOM) offers many tax and non-tax benefits including:

  • Low personal income tax rates.
  • Personal income tax capped for high income earners.
  • No capital taxes, i.e. no capital gains tax, inheritance tax or wealth taxes.
  • Sterling currency.
  • No restrictions on property ownership.
  • Familiar surroundings; good quality of life, personal security and peace of mind.
  • Small school class sizes and excellent sports facilities.
  • Friendly and vibrant social scene, with low unemployment.
  • Direct flights to all major UK and Irish airports, including London, Birmingham, Manchester, Liverpool, Glasgow, Belfast and Dublin.

A brief tax comparison between the IOM and the UK: (see our summary table on this link)

  • Basic personal allowance is £1,100 greater in the UK.
  • The IOM does not reduce the basic personal allowance depending on your income level, whereas a UK resident could lose their personal allowance if their income level is above £100,000.
  • Both jurisdictions provide an age allowance. However, the IOM does not reduce this age allowance based on an individual’s income level.

The Isle of Man Tax Scope and Rates


Manx residents are charged to income tax on their worldwide income with Double Tax Relief given where appropriate. The standard rate of income tax is 10% and the higher rate is 20%.

The Individual Tax Cap allows those individuals with substantial income each tax year to pay a maximum tax of £125,000 per annum, or £250,000 for a couple who are taxed jointly, if entering the scheme from 6 April 2015. An election for the tax cap will apply for 5 consecutive years.

There are also fairly generous personal allowances and deductions, including:

  • A tax free personal allowance of £9,500 per individual, which is transferrable between spouses who are jointly assessed.
  • A tax deduction at 10% for Mortgage/Loan interest paid providing it is paid to a Manx lender. This is given by way of reducing the tax due, but is restricted to £7,500 per person each year so that the maximum deduction is £750.
  • Tax relief at 10% for the cost of residential/nursing homes subject to a maximum relief of £9,500 per individual.
  • Tax relief at 10% for charitable donations subject to a maximum relief of £7,000 per individual.

Tax relief is also available for pension contributions up to £300,000 per annum in certain circumstances. The IOM’s pension legislation makes the Island a particularly attractive place for pension schemes to operate. As this is a specialist area we could assist you with seeking the appropriate qualified advisers on the Island.

With regards to UK sourced pensions, under the IOM and UK Double Tax Agreement pension income is taxed in the jurisdiction in which the tax payer is resident. Therefore if an individual is resident in the IOM, and receives a UK pension, it can be paid gross and taxed in the IOM only, following a claim being made to H M Revenue & Customs. This is attractive for an IOM resident who will pay a maximum of 20% income tax in the IOM, compared to possibly 45% in the UK.

The IOM authorities have a policy for attracting businesses and wealthy individuals to live here. If you are looking for a low-tax jurisdiction the Isle of Man is definitely a destination to consider.


Residence


There is little legislation relating to defining tax residence. The Isle of Man Income Tax Division’s Practice Note PN 144/07 sets out their practice. Generally speaking you will be resident in the IOM if:

  • You spend more than 6 months in the Island in any tax year; or
  • The average time spent in the Isle of Man over a 4 year period exceeds 90 days per annum.

There are no restrictions for UK and EU nationals who want to take up residence in the IOM, but a work permit system does apply for new residents. Under normal circumstances a work permit is required for the first 5 years of residence, and the system is designed to give Manx people the first chance to fill job vacancies.


If you have any queries or would like to discuss your tax situation please contact:


Dennis McGurgan



This article has been prepared from the Isle of Man and UK Governments announcements, guidance and legislation and could be subject to revision. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Grant Thornton Limited, its directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

Grant Thornton Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. Please see www.grantthornton.co.im for further details.