How will the 2020-21 Isle of Man budget affect me? The key question on everyone’s lips.
The personal tax allowance
This is the change that will impact most of the population. The income tax personal allowance has risen to £14,250, although the standard rate tax band of 10% remains at £6,500 with the 20% band taking effect on earnings over and above £20,750.
Comparison of personal allowance change
National insurance thresholds
In summary this means that each taxpayer will be £50 better off each year regardless of income level.
National insurance is payable on amounts between prescribed thresholds known as earnings limited, the current rate of national insurance payable between the primary threshold and upper earnings limit is 11% and anything above the upper earnings limit is taxed at an additional 1%.
The primary earnings threshold has risen to £138 per week (£7,716 per annum) whilst the upper earnings limit has risen to £823 per week (£42,796 per annum).
This means that some lower earners will move outside the scope and means that based on last year’s rates, anyone who earns circa £41,000 will now not pay the additional 1% until their earnings exceed the £42,796 mentioned above, whereas last year they would have paid 12% based on those rates.
The tax cap
The tax cap has been amended allowing high net worth individuals to elect for varying tax cap lengths of either 5 or 10 years and the tax cap value has increased to £200,000.
What this means is that if you believe your tax bill will exceed £200,000 you can elect to have your tax capped at £200,000. However, the stipend to this is that you must then pay that amount of tax for the next 5 or 10 years. So advantageous if you know your income levels will remain high, however if they fall dramatically unfortunately you are still liable.
The amendments to benefits
A key component of the current budget was that the majority of benefits and allowances experienced an increase, key items are:
- Income Support Disability and Disabled Child Premiums (5.2%)
- Nursing Care Contribution (3.6%)
- Disability Living Allowance (2.0%)
- Basic state pension (3.9%)
- Additional state earnings related pension (1.7%)
- Manx State Pension up to the full rate (3.9%)
- Income Support Pensioner Premium (5.2%)
- Manx State Pension Transitional Amount (affecting those on low incomes (1.7%)
- Child Benefit (2.0%) (The allowance for the first child will also increase by £7.45 per week)
- Employed Person’s Allowance – basic allowances (1.6%, but 5.7% for
- Attendance Allowance (2.0%)
What can Invicta do for you?
Invicta Accounting can take over your tax administration and submissions and liaise with the tax office on your behalf.
We will complete your tax return for you and talk you through your tax calculation ensuring that you have elected and utilised all available allowances and claimed allowable expenses available to you before submitting the return on your behalf.
Call Invicta Accounting on 01624 672358 or emails us at firstname.lastname@example.org for more information.