Income tax to rise from 20% to 22% in the Isle of Man as minister delivers annual budget

  • Dr Alex Allinson MHK, Treasury Minister

Income tax in the Isle of Man is set to rise from 20% to 22%, with additional funds to be reinvested into the healthcare service.

The tax rise is the first in 14 years for the island, and will come into effect from 6th April 2024.

It follows £46.8m of overspending across all government departments over the past year.

Treasury Minister, Dr Alex Allinson, described this year's plan for Manx finances as a 'difficult budget', and one that was formed 'in very difficult circumstances'.

Dr Alex Allinson delivered his second annual budget under the current government. Credit: ITV Granada Reports

Within his speech in Tynwald, Dr Allinson said: "The changes that I announce today should be seen as the start of a process of moving toward a different approach to taxation.

The personal allowance will remain at £14,500 for an individual and £29,000 for a jointly assessed couple. The measure, put in place at last year’s budget, whereby higher earners have their personal allowance reduced by £1 for every £2 of total income over £100,000, will remain unchanged.

I am also holding the lower rate of income tax at 10% and the threshold of income taxable at £6,500 for a single person and £13,000 for a jointly assessed couple.

"Reluctantly, however, after exploring my options for a balanced budget, I have made the difficult decision to increase the higher rate of income tax from 20% to 22%, ring fencing this extra income to support our NHS."

The Isle of Man's annual budget was debated in Tynwald, the Manx parliament. Credit: ITV Granada Reports

The government is expected to spend £1.3 billion over the next financial year, which equates to £16,343 per person.

When asked about the threat of recession in the UK, Dr Allinson said: "I think the Isle of Man is in a slightly different situation to the United Kingdom.

"But we do know that the local economy has been affected by higher prices".

  • Dr Alex Allinson on whether the UK recession has an impact on the Isle of Man

Despite continued departmental overspend, all government departments are expected to receive additional funds.

Spending across government departments

  • The Department of Health and Social Care: £41.2 million

  • The Department of Education, Sport and Culture: £18 million

  • The Department of Infrastructure: £7.2 million

  • Cabinet Office: £4.6 million

  • The Department of Home Affairs: £4.2 million

  • Treasury: £3.3 million

  • The Department for Enterprise: £1.3 million

  • The Department of Environment, Food and Agriculture: £1.3 million

Government has also committed to spending £429m on capital projects over the next five years, with £101m put aside for the next financial year.

Much of the government's finances has been reliant on the island's reserves since the Covid-19 pandemic, with £98m expected to be used over the next year.

Minister Allinson said: "We will need to use our reserves over the medium term to protect our essential public services, but that this need will reduce to a much lower level in future years.

"Our invaluable reserves, which have provided our nation with a cushion and the stability to withstand the global events of the last three years, have also suffered the effects of market volatility."

He concluded: "As I have already stated, we must protect our vital services, however, in doing so we can no longer simply rely on reserves."

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