Isle of Man personal income tax to fall by 1%

A 1% reduction in the higher rate of personal income tax and an uplift in personal allowances have been revealed in the latest Isle of Man budget.

Treasury Minister Alex Allinson has allocated a total of £1.46bn in government spending in his financial plan for 2025-26.

That equates to £17,249 per person, a rise of £906 from the current year.

The measures include a £250 rise in personal allowance to £14,750, the first increase for three years, and a reduction in the higher income tax rate to 21%.

As tax thresholds have remained the same, the 1% reduction will apply to earnings over £21,250.

Allinson said the Treasury was planning to carry out a staggered approach to reducing income tax, after it was increased to 22% from 20% last year to "maintain reserves".

The changes, which apply from April, will also see the island's tax cap increase by £20,000 to £220,000.

Under the measures unveiled, National Insurance thresholds have risen meaning people on lower incomes would see their contributions fall.

As previously announced, people who receive state pensions on the island will see their payments increase 4.1%, in line with the UK's "triple lock" principle.

That follows the pausing of plans to move to a "double lock" system for those who retired after 5 April 2019 in a bid to extend the life of the National Insurance Fund.

Those proposals were pulled from the budget following concerns by several members of the House of Keys over a lack of consultation.

Other changes include a £10,000 rise to child benefit thresholds, which will stand at a maximum of £90,000 in earnings, and an inflationary rise to the payments of 2.2%.

Income support will also go up by the same percentage along with most other benefits, however maternity and paternity allowance will rise by 3.5%, the nursing care contribution increases by 5.3%, and the Winter Bonus will rise by £50 to £400.

While most households are set to benefit from changes to income tax allowances and national insurance thresholds, Allinson said a "small number" would be worse off.

A single person with no children earning an annual salary of £55,000 would pay an extra £50 a year, while a couple with no children and one working would pay a further £208 a year.

During his speech, the minister told Tynwald members the Final Expenditure Revenue Sharing Arrangement with the United Kingdom government had been finalised, with the island's share of common duties, including VAT, "broadly in line with budgeted projections".

He said the Treasury had "prudently held back a provisional amount" of funds over the past five years, part of which would be used as a "rebalancing payment" to HM Treasury.

The remainder set to be used to offset overspends in the current year and £10m of "anticipated additional spending in the forthcoming year", he said.

While most government departments have been given an uplift of 2% on pay costs and a further 1% on non-pay costs, the budget of the Department of Health and Social Care (DHSC) includes a 5.3% uplift for Manx Care, which equates to £11m.

It means the island's health care provider, which is facing a £15m overspend for this financial year, will receive £357m to deliver its services.

Manx Care's access to money from a new £14m contingency fund for health spending in addition to that budget must be agreed by the DHSC and the Treasury.

A consultation will also be launched into the creation of a healthcare levy to help address the growing cost of the National Health Service, which was first outlined during last year's budget.

However, Allinson said the government could not "continue to write a blank cheque that starves other essential services of investment and increasingly threatens the overall future finances" of the island.

"Treasury will continue to work with the Department and Manx Care to drive not just value for money, but the improved patient safety and delivery of services we expect and our people deserve," he said.

The Department of Education, Sport and Culture has been given an additional £8.3m boost in funding, including an additional £3m to deliver the aims of the Childcare Strategy by providing additional financial support to working families.

A total of £5.3m has also been earmarked for digitising and automating processes across the island's government to increase efficiencies.

The budget draws on a total of £110.6m of reserves, a figure set to reduce over the next five years to £49.7m in 2029-2030.

Over that period £300m has been allocated for capital projects, with £87.4m earmarked for the 2025-26 year.

That includes £1.9 million for the Ballasalla Bypass junction, £300,000 for additional classroom capacity at Ballasalla School, and £3.2 million funding for the design and feasibility of a replacement Castle Rushen High School.

Allinson said the measures were a "plan to put money back in people's pockets, to increase consumer confidence, to give business certainty and stability, and to enable continuing economic growth that can be enjoyed by all those who call the Isle of Man their home".

"This budget tries to address the significant challenges we all face, but also holds out the ability to seize the opportunities that are out there to create a fairer, more vibrant and sustainable island," he added.

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