Isle of Man: Isle Of Man Budget 2001

Last Updated: 22 March 2001
Article by Mike Dean

"Hugely beneficial to existing businesses on the Island and will serve as a major attraction to other businesses looking to move to the Island."

Arthur Lancaster, Ernst & Young Director Of Tax

In his budget speech in Tynwald on 20 February 2001, Treasury Minister Richard Corkill gave clear substance to the strategy he announced some 8 months previously that it was the Governments intention over a three to five year period to reduce income tax rates for individuals and companies as well as increase personal allowances with a view to securing the Islands economic future through a keenly competitive but fair taxation system in line with international standards.

In what could be described as one of the most significant budgets for over 30 years, the Treasury Minister announced major tax cuts and it clearly signals the Island's intention to use this tax cutting budget to provide a solid platform from which to send out its message of being a progressive offshore financial centre, attractive to existing and new businesses alike.

Brief details of the proposed measures are as follows:

Income Tax Rates And Allowances



Personal allowances



Single person



Married couple (combined)



Income Tax Rates



Standard rate



Lower rate for trading companies



Higher rate



Non-resident rate



Tax Thresholds



Single person



Married couple (combined)



Lower rate band for trading companies



The reduction in tax rates for both individuals and companies is a very significant one. The reduction will be hugely beneficial to existing businesses on the Island and will serve as a major attraction to other businesses looking to move to the Island.

Typically, a married man coming to the Island with a mortgage of, say, £200,000, could need to earn in excess of approximately £28,000 gross per annum before paying any tax at 12% and as much as £48,000 gross per annum before paying tax at the higher rate of 18% due to the interaction of lower tax rates, increased personal allowances and existing mortgage interest relief provisions. You can compare the Isle of Man personal tax rates against those of UK and Ireland on the Ernst & Young TaxOmeter interactive income tax calculator at

This has to be good news for businesses wanting to attract key staff.

The tax reduction for trading companies is also a significant one. For illustration purposes, a company with a profit of £500,000 will pay £32,500 less in 2001/02 than it would have done on the same income in 2000/01 which represents a 35% reduction in its tax liabilities from one year to the next based on these comparisons.

In the last few years, many jurisdictions have tried to reduce direct tax rates and these budget measures have certainly placed the Island at the forefront of tax cutting administrations, as it pursues its stated intention to achieve a 10% standard rate and 15% higher rate by 2005 or hopefully sooner.

As part of the Tax Strategy Richard Corkill announced that Shipping and Insurance companies would all become subject to 0%. In the budget Fund Managers joined the list of tax-free businesses, with the announcement that the level of relief available to fund managers is to be increased from 75% to 100%. This measure will be welcomed by all fund managers based on the Island.

The scheme whereby the cost of connection charges for ISDN and ASDL technology is met by Government is to continue for a further twelve months. The scheme is financed by the Department of Trade and Industry.

The Treasury Minister also announced plans to re-introduce the commercial buildings allowance for two new designated areas (Ramsey and Port St Mary), identified as priority areas by the Economic Development Committee of the Council of Ministers.

The incentive will be similar to that which was introduced for lower Douglas in 1994. It will be valid for three years commencing on 5 April 2001 with a subsequent two year run off period. Full details will be issued when the enabling legislation and areas have been approved.

The budget measures seem to be sending out a resounding message to the business community that the Island is determined to remain at the forefront of progressive offshore jurisdictions. It also evidences the fact that a well-run, innovative economy can deliver savings and that by passing on these savings with a progressive taxation strategy the Government is looking to continue to stimulate the economy and secure long-term security for the Islands economy. We look forward to next year's budget statement with eager anticipation!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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