Isle of Man Personal Income Tax

Residents are subject to tax on worldwide income. Nonresidents are subject to tax on income from Isle of Man sources only.

Individuals are considered resident in Isle of Man if any of the following conditions applies:

  • They are present for six months or more during the tax year.
  • They are present for an average of 90 or more days per tax year over a period of four or more consecutive years.
  • The individual’s specific circumstances indicate “a view or intent to establish residence.” The Assessor of Income Tax con­siders several factors in determining the applicability of this condition.

Certificates of residence can be provided if the Assessor of Income Tax is satisfied that the conditions of residence are fulfilled.

Income subject to tax. The taxation of various types of income is described below.

Employment income. An employee is taxed on remuneration and benefits received during a tax year (ending on 5 April). Taxable ben efits include company cars and accommodation.

Education allowances provided by the employer to its employees’ children 18 years of age and under are taxable for income tax and social security purposes.

Self-employment and business income. Self-employment income includes income from a trade, profession or vocation.

A self-employed individual is assessed on business profits. In general, the assessment for a particular year is based on business profits earned during an accounting period ending in the current tax year. For tax purposes, profits are usually determined in accordance with normal accounting principles, subject to certain ad just ments (see Business deductions).

Investment income. For tax purposes, investment income, including dividends, interest, royalties and rental income, is included in an individual’s total income. Double tax relief is granted on income subject to withholding tax in another country (see Section E).

Relocation of key employees. If an individual is contractually obligated to take up residence in the Isle of Man to facilitate the process of starting up a new business or the diversification or expansion of an existing one and if the necessary approval is obtained, the individual and his or her jointly assessed spouse can be subject to income tax on Manx-source income only for the first three years of residence. For the company, financial assis­tance may be granted for any reasonable relocation package that needs to be incurred with respect to the new business.

Personal service companies. Effective from 6 April 2014, deemed employment provisions apply if an individual provides services to a client and if the services are not performed under a contract between the worker and client, but under an arrangement involv­ing a third-party company. If the services had been provided under a contract directly between the worker and client and if the worker would have been an employee of the client, deemed employment exists. As a result, the worker is treated as an employee of the client and not the third party.

Taxation of employer-provided stock options. The Isle of Man has no specific legislation addressing the taxation of employer- provided stock options. In practice, any benefit received is tax­able on grant rather than exercise. A capital gain that arises at the exercise of the option is not taxable. Clearance can be obtained in advance with respect to the taxation of specific options in the Isle of Man.

Deductions

Deductible expenses. Expenses are deductible if they are incurred wholly, exclusively and necessarily in the performance of employ­ment duties. No allowance is available for travel between home and work or for office attire. Allowable expenses include mem­bership fees of approved professional bodies and contributions by an employee to a personal pension scheme. The maximum deduction in a tax year for contributions to a personal pension scheme is GBP300,000, or 100% of relevant earnings, whichever is less. The Isle of Man does not provide for a lifetime allowance with respect to benefits from personal pension schemes.

Tax relief for the expenses listed below is granted through a 10% reduction of the individual’s tax liability. The 10% tax reduction is granted on the lower of the amount paid or the maximum amount permitted. The following are the relevant expenses:

  • Mortgage and loan interest payable to an Isle of Man lender, up to a maximum amount of GBP7,500 (GBP15,000 for married couples or civil partners who are jointly assessed)
  • Private medical insurance premiums for residents 60 years of age and older, up to a maximum amount of GBP1,800
  • Charitable donations, up to a maximum amount of GBP7,000
  • Payments made under Educational Deeds of Covenant, up to a maximum amount of GBP5,500. (An Educational Deed of Covenant is an irrevocable covenant for the benefit of a person between 18 and 25 years of age who is undertaking a course of higher education. The covenant must be entered into before 6 April 2011 and made by a parent or grandparent of the donee, and the donee must be within the qualifying age band when the covenant is made and when the payment is made.)
  • Nursing expenses incurred in caring for a dependent relative, up to a maximum amount of GBP9,300

Personal deductions and allowances. The following personal allow­ances apply for the tax year ending 5 April 2017.

Type of allowance                                            Amount (GBP)

Single allowance                                                     10,500

Married couples’ and civil

partners’ allowance                                                 21,000

Single parent                                                             6,400

Blind person (additional)                                           2,900

Disabled person (additional)                                     2,900

Person aged 65 or over at beginning of tax year

(additional)                                                                1,000

Business deductions. Expenses incurred wholly and exclusively in producing self-employment or business income are de ductible. The following expenses are not allowed for tax purposes:

  • Depreciation
  • Costs of a capital nature

Although costs of a capital nature are not deductible, capital allowances (tax depreciation) are deductible in computing tax­able profits. Capital allowances include a 100% first-year allow­ance for plant and machinery and a 25% annual allowance on a reducing-balance basis for cars. The car allowance is limited to an annual maximum of GBP3,000.

A 100% first-year allowance is available for qualifying expendi­ture incurred to acquire, extend or alter qualifying industrial build­ings, agricultural buildings and tourist premises.

Rates. The following are the income tax rates for resident indi­viduals for the tax year ending 5 April 2017.

Taxable income   Rate on
Exceeding Not exceeding Tax excess
GBP GBP GBP %
0 8,500 850 10 (lower rate)
8,500 20 (higher rate)

The 10% rate applies to the first GBP8,500 of income for each individual above their personal allowance (see Personal deduc­tions and allowances). Married couples and civil partners wish­ing to be taxed jointly must make an election. If an election is made, the 10% rate applies to the first GBP17,000 of joint income in excess of the married couples’ and civil partners’ allowance (GBP19,000 for the tax year ending 5 April 2016).

A cap on an individual’s annual tax liability is available on appli­cation. The maximum amount of income tax payable by an Isle of Man resident taxed under the tax cap is GBP125,000 (GBP250,000 for married couples electing to be taxed jointly) for the year ended 5 April 2017, regardless of the amount of his or her worldwide taxable income.

Effective from 6 April 2014, a resident individual or jointly assessed married couple or civil partners must make an election in order for the tax cap to apply. If an election is approved by the Assessor of Income Tax, it will apply for five consecutive tax years at the amount applicable for the first year of election.

Nonresidents are taxed at a rate of 20% on all income arising in the Isle of Man. Nonresidents are not entitled to a personal allow­ance. The tax liability of nonresidents with respect to certain types of income is limited to the income tax deducted at source, if applicable.

Relief for losses. Business losses may be carried forward and off­set against future profits from the same trade or, carried back to the immediately preceding year and offset against profits from the same trade. Business losses can also be offset against other per­sonal income in the current or preceding year. Business losses incurred in the first four years of assessment may be carried back against other income. On the permanent discontinuance of a trade, a terminal loss may be carried back and offset against profits from the same trade in the three preceding years of assess­ment. Certain restrictions apply.

Other taxes

No capital gains tax, inheritance or estate tax, wealth tax, stamp duty or stamp duty land tax is imposed in the Isle of Man. Land registry fees are payable on the transfer of Isle of Man property. The general rate is GBP5.70 for each GBP1,000 of value. However, some exceptions exist.

Social security

In general, National Insurance contributions are payable on the earnings of individuals who work in the Isle of Man.

The Isle of Man has a reciprocal agreement with the United King­dom that permits National Insurance contributions to be paid in either jurisdiction to count toward total payments required.

For the year ending 5 April 2017, an employee’s National Insur­ance contribution is 11% of weekly earnings between GBP118 and GBP784 (9.4% for employees who contract out of the state second pension [S2P], which is permitted if the employee is a member of an approved occupational pension scheme). The annual ceiling on the amount of wages subject to an employee’s National Insurance contributions at a rate of 11% is GBP40,768. Any earnings above this amount are subject to National Insurance contributions at a rate of 1% for the year ending 5 April 2017. An employer must pay contributions of 12.8% of an employee’s weekly earnings exceeding GBP118 (GBP6,136 a year) for the year ending 5 April 2017, with no ceiling.

A self-employed individual must pay a weekly flat-rate contribu­tion of GBP5.40 per week if annual profits are expected to exceed GBP6,136 for the year ending 5 April 2017. In addition, an annual contribution equal to 8% of profits between GBP6,136 and GBP40,768 is also payable for the year ending 5 April 2017. This contribution is collected together with the individual’s income tax. An additional Class 4 contribution equal to 1% of the profits or gains of self-employed individuals above the annual upper profits limit is payable.

Tax filing and payment procedures

The tax year runs from 6 April to the following 5 April. Resident individuals must complete annual tax returns containing details of worldwide income arising or accruing during the tax year. The tax return must be submitted by 6 October following the end of the tax year. An initial GBP100 filing penalty is imposed for late submissions.

Married couples and civil partners may elect to be taxed jointly, enabling the sharing of allowances and lower rate thresholds.

Income tax and National Insurance contributions are deducted at source from employment income by the employer, in accordance with a tax code issued by the tax authorities, which takes into account available allowances, deductions and thresholds. A pay­ment on account may be due by 6 January in the tax year or 30 days after the notice of assessment if income from which tax is not deducted at source (for example, investment or self-employment income) is expected to arise in the tax year. This payment equals 105% of the tax liability for the preceding tax year if greater than GBP250. If less than GBP250, no payment on account is required.

If total income is assessed in accordance with the tax return at the end of the tax year, any tax liability in excess of tax deducted at source or paid on account becomes payable. Any tax payable is due on 6 January following the end of the tax year or within 30 days of the date of the assessment, whichever is later.

A separate assessment is issued for profit-related National Insurance contributions.

For late income tax payments, interest is charged at an annual rate of 5% on the amount of overdue tax, or 10% if the return is not submitted by 5 April following the year of assessment.

Nonresidents must submit a tax return if any Isle of Man-source income is received in the year, unless the income was subject to withholding tax. Withholding tax at a rate of 20% is imposed on rental payments to nonresident individuals (the rate is 10% for payments to nonresident companies), but no withholding tax is imposed on dividends and interest.

Double tax relief and tax treaties

Double tax relief is available for foreign tax paid if evidence of payment is produced. Relief is granted in an amount equal to the lesser of the following amounts:

  • The amount of foreign tax paid on the income
  • The marginal amount of Isle of Man income tax attributable to the foreign-source income

The Isle of Man has entered into double tax treaties with the following countries.

Bahrain                          Jersey                            Seychelles

Estonia                           Malta                             Singapore

Guernsey                       Qatar                              United Kingdom

It has also signed double tax treaties with Belgium and Luxembourg, but these treaties are not yet in force. The Isle of Man has also entered into agreements with Australia, New Zealand and Slovenia that allocate the taxing rights of certain income of individuals.

In addition, the Isle of Man has entered into agreements with the following countries to eliminate the double taxation of profits with respect to enterprises operating ships or aircraft in international traffic.

Denmark*                      Germany                        Norway*

Faroe Islands*               Greenland*                    Poland*

Finland*                        Iceland*                         Sweden*

France                            Netherlands                   United States

* These countries have also signed agreements with the Isle of Man to eliminate the avoidance of double taxation on individuals.

The Isle of Man has signed tax information exchange agreements (TIEAs) with the following countries.

Argentina                       Greenland                      Norway

Australia                        Iceland                           Poland

Botswana*                     India                              Portugal

Canada                           Indonesia*                     Slovenia

China                             Ireland                           Swaziland*

Czech Republic              Italy*                             Sweden

Denmark                        Japan                             Switzerland*

Faroe Islands                 Lesotho*                        Turkey*

Finland                          Mexico                          United Kingdom

France                            Netherlands                   United States

Germany                        New Zealand

* TIEAs with these countries are awaiting ratification.

Temporary permits

The basic immigration law in the Isle of Man follows the United Kingdom Immigration Act of 1971, which applies to almost everyone who is not a British citizen or who does not have the right of abode in the United Kingdom. However, under treaty rights, some Irish citizens and citizens of European Economic Area (EEA) countries are exempt from many provisions of the act.

Effective from 9 July 2010, a Manx points-based system (PBS) replaced the existing Overseas Labour Scheme. The PBS applies to individuals born outside the EEA, and details of the scheme may be obtained from the Department of Economic Development. The PBS is in line with UK legislation.

Any person seeking to enter the Isle of Man should initially con­tact a British embassy, high commission or consulate for advice on entering the country and to ascertain if it is necessary to obtain a certificate of entitlement, visa entry certificate, governor’s let­ter of consent or work permit.

Please refer to the UK chapter for the rules pertaining to tempo­rary permits applicable in the Isle of Man.

Work permits and self-employment

Under the provisions of the Control of Employment Acts, any person who is not an Isle of Man worker must obtain a work permit issued by the Work Permit Committee of the Department of Economic Development before taking up employment or self-employment in the Isle of Man, except individuals in a few exempt categories (for example, police officers, doctors, dentists and ministers of religion). The employer of a foreign national must apply for a work permit on behalf of the foreign national.

To qualify as an Isle of Man worker, a person must satisfy one of the following conditions:

  • He or she was born in the Isle of Man.
  • He or she has been ordinarily resident in the Isle of Man for at least 10 consecutive years.
  • He or she has been ordinarily resident in the Isle of Man for at least 5 consecutive years and has not lived elsewhere more than once in the following 15 years.
  • He or she is married to an Isle of Man worker.
  • He or she was married to an Isle of Man worker and lived in the Isle of Man for at least three years immediately before becom­ing widowed or divorced and continued to live in the Isle of Man thereafter.
  • He or she is the child of an Isle of Man worker who was serving in the armed forces, or married to a person who was serving in the armed forces, at the time of birth.
  • He or she is the child of a parent who was born in the Isle of Man, provided that the parent lived in the Isle of Man for his or her first five years.
  • He or she has received full-time education, either in the Isle of Man or elsewhere, while normally living in the Isle of Man, and continues to live in the Isle of Man thereafter.

Applications for work permits are made to the Work Permit Committee. Employment may not begin before a permit is issued.

Effective from 1 March 2016, an individual who is employed or seeking employment in certain Information and Communication Technologies and e-business (including e-gaming) roles is exempt from the usual requirement for a work permit under the Control of Employment Act 2014. The Control of Employment (Amendment) Order 2016, which was approved by Tynwald in February 2016, introduced these exemptions.

The exemptions apply only to employment of at least 12 months’ duration, with a salary, excluding bonuses, of at least GBP25,000 a year. They apply to EEA nationals only.

Before beginning self-employment, self-employed persons who do not qualify as Isle of Man workers must obtain work permits in the same manner as those seeking employment.

Residence permits

No regulations restricting the entrance of new residents into the Isle of Man currently exist.

Family and personal considerations

Family members. Any application for a work permit by a spouse of a working foreign national is automatically approved for a period of up to one year and is renewable annually if certain conditions are met.

Marital property regime. Isle of Man does not have a community property or similar marital property regime.

Driver’s permits. New residents must obtain Isle of Man driver’s licenses. Persons holding current UK and Channel Islands driver’s licenses may obtain Isle of Man driver’s licenses by presenting their existing driver’s licenses to the Vehicle Licens ing Office. Persons holding driver’s licenses other than those issued in the United Kingdom or Channel Islands may have to take driving tests.

UK- and foreign-registered motor vehicles must be registered as soon as possible after the owner takes up residence in the Isle of Man. It is necessary for owners of vehicles from the United Kingdom to register motor vehicles by presenting the following documents:

  • The existing vehicle registration.
  • A current insurance certificate for the vehicle.
  • If the vehicle is more than three years old, a vehicle testing certificate. Motor vehicles may be tested in the Isle of Man and owners issued testing certificates.

Persons wishing to register foreign vehicles from outside the United Kingdom, as well as commercial and other types of vehicles, must contact the Vehicle Licensing Office to inquire about additional registration requirements.