'Significant' personal tax allowance rise on cards

The financial plan for the year ahead for the Isle of Man will be revealed in Tynwald on Tuesday, with details of a promised "significant" rise the personal tax allowance due to be revealed.

The budget will be presented by a relatively new face in the Treasury after a January reshuffle saw Alex Allinson replaced by Chris Thomas.

Chief Minister Alfred Cannan said the change in approach was designed to "reset the economy" with budget amendments due to "put more money in people's pockets".

There has been scepticism about the timing of the planned rise, which will come into effect on 1 April - five months before a general election.

The measure, which sets the amount a worker can earn tax-free, is in part to compensate for a backtrack by the government – supported by Tynwald – on a planned 9.9% rise in the minimum wage in April.

That rise would have seen the hourly rate increase to £13.46.

However, the figure was instead cut to 5% - which will see the rate rise from £12.25 to £12.86 per hour - after a lengthy debate in the parliament.

Arguments put forward for the U-turn highlighted concerns raised, particularly by the hospitality trade, about the effect it could have on firms' viability.

Although the new personal allowance is yet to be revealed, it is bound to be higher than the modest £250 rise implemented last year - which took the figure to £14,750.

That marked the first rise in the allowance for three years.

Thomas said the measures due to be presented to Tynwald would benefit "nearly everybody", as it would see "a substantial number of people" taken out of paying tax.

But, despite that, he has ruled out bringing in certain other taxes to compensate for it.

"We're not introducing - because that's not the Isle of Man tax tradition - capital gains tax and wealth taxes," he said.

However, those at the highest end of the earning spectrum cannot necessarily expect to be better off.

"We've got a tax cap system here and I haven't heard of any plans to change the way we do with that," he said, "but they won't benefit from an increase in the personal tax allowance."

Responding to scepticism about the promised rise in personal allowances, which has been suggested by some to be a giveaway measure to curry favour with voters in an election year, Thomas insisted that was not the case.

He said the planned increase was about bringing the allowance back in line with inflation.

"I'm certainly conscious that that is a perception," he said. "I don't want to see it like that, and it isn't like that."

He said that rather it marked a step away from fiscal drag – whereby wage inflation reduces the real value of tax-free allowances that do not keep pace – being used as a "deliberate policy of getting public revenue".

"We're stopping that, we're putting up the personal tax allowance back closer to where it would have been if the rise had been continuous with inflation," he said.

The measure would be "good for more than just minimum wage earners" as it would also benefit businesses employing people and make sure "that their jobs are still there next year".

"So it's a budget about confidence, it is in the run up to an election, but the two things are separate," he said.

"And what's wrong with putting money in people's pockets whatever time it is relative to the election?"

Thomas said although he had only been in post for a short time, the budget cycle "goes on pretty much from when the last budget was made".

"Since then my predecessor, other politicians and the Council of Ministers, officers all around government and beyond have been working on preparing a budget to keep public services going," he said.

"Treasury's role is to finance those public services and to raise what's necessary from the public to pay for those public services."

Teasing a budget "for stability, for security" and of "confidence", Thomas said while the personal tax allowance change had been well trailed there was "so much more" in the budget.

He said although the political changes had seen the minimum wage increase "slowed down" in January, and February would see the budget outlined, the delivery of the plan would look further ahead.

It would focus on a programme that was about "increasing productivity" and "dealing with the fact that we've got fewer reserves in real terms than we had years ago".

He said although the island "has still got a lot of reserves", there was an ongoing "structural financing issue".

"The Isle of Man traditionally has earned more than it's spent in each year and we haven't managed that in the last few years," he said.

"We've got a slight feeling of pessimism around the place," he said, "and want to make sure that we take hold of the public mood and [show] we're confident about ourselves and about our future because we should be."

Thomas is set to deliver his speech outlining the Isle of Man Budget 2026-27 when the February sitting of Tynwald begins at 10:00 GMT on Tuesday.

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