A compulsory system of social security, known as National Insurance, is operated in the Isle of Man for all persons over the age of 16, except for full-time students (for whom it is voluntary), to finance the provision of benefits such as retirement pensions, widows' pensions, payments during periods of sickness or unemployment, and compensation for industrial injuries.

Social security contributions are payable at the same rates as in the UK, and the rules concerning contributions are also similar to those applying in the UK.

There are four classes of National Insurance contributions:

Class 1 -- for employed persons and their employers, earnings-related

Class 2 -- for self-employed persons, flat rate

Class 3 -- for unemployed persons, voluntary

Class 4 -- for self-employed persons, earnings-related, payable in addition to Class 2 contributions.

Employees may be contracted out by their employers from the earnings-related part of the Island's pension plan if they belong to an employer's occupational pension scheme or contribute to a personal pension plan. Lower Class 1 contributions are payable, both by the employee and the employer, where the employer has contracted out of the Island's scheme.

Generally, Class 1 contributions are payable for a foreigner working in the Isle of Man from the date on which the Isle of Man employment begins. However, liability to contributions at the Class 1 rate may be deferred for 52 contribution weeks (counted from the beginning of the contribution week following the week of arrival) for an employee not ordinarily resident in the Island who has been sent to work there temporarily by a foreign employer. The full contribution rates for the year ending 5 April 2000 are shown below:

Class 1





(£ )



Less than 66.00



66.01 - 83.00



83.01 - 500.00

Class 2 -- £6.55 per week for the year ending 5 April 2000. Individuals can obtain exemption if net earnings are less than £3,770 per year.

Class 3 -- £6.45 per week for the year ending 5 April 2000.

Class 4 -- Payable where annual profits exceed £7,530. Rate of 6.0% of profits between £7,530 and £26,000.

Employers' contributions are deductible expenses for tax purposes but employees' contributions are not. Class 4 contributions of self-employed individuals are tax deductible, although in practice tax relief is against the contribution rather than by reducing the tax bill.


Local taxes

Local Government authorities levy taxes, known as rates, on occupied real estate. Rates are based on estimated annual rental values, not on occupier's income, and vary widely from area to area. Local taxes are at a low level.

Duty is payable on the formation of a company based on authorised capital as described under "Establishing a Business". Vehicle licence and various other small licences and duties are payable.

The information given is not exhaustive and is based on conditions existing at 5 May 1999. Readers are advised to consult with professionals, such as independent accountants, legal counsel, and investment bankers, before taking any formal action. Deloitte & Touche would be pleased to discuss specific problems.