On the face of it, the budget appeared to be full of good news; tax cuts, NI thresholds increased, personal allowances raised, “the plan to put money back in the people’s pocket”, Dr Allinson MHK announced.
We’ve summarised the key points for you here and look forward to hearing your thoughts on the island’s plan for 25/26 onwards.
The funding and future of the Manx State Pension remains a problem for Treasury. The “triple-lock” is clearly up for debate and Chief Minister Alf Cannan has already said that politicians “need to be prepared to make tough decisions” on the future of the triple-lock.
We will continue to watch this space.
The Isle of Man’s Budget for the fiscal year 2025-26, was presented by Treasury Minister Dr. Alex Allinson on Tuesday 18th February 2025. Here is a summary of the main points.
Taxation and National Insurance Reforms
A significant highlight of the budget is the reduction of the higher rate of income tax from 22% to 21%, aiming to alleviate the financial burden on individuals and families. The intention to reduce this back down to 20% ‘when affordable’ was also confirmed.
Additionally, the personal income tax allowance will increase by £250 for individuals and £500 for jointly assessed couples, setting the new thresholds at £14,750 and £29,500 respectively. These changes are designed to increase disposable income for taxpayers across the island.
At the other end of the scale, the tax cap charge was increased to £220,000 per annum.
National Insurance (NI) adjustments were also included. The Class 1 Primary and Secondary Thresholds, along with the Class 4 Lower Profits Limit, will rise, allowing workers to begin paying NI on earnings over £168 per week, up from the previous £160.
Importantly, there will be no changes to employer NI contributions, providing some stability for local businesses. The National Insurance Holiday Scheme will continue for returning Manx students but will close to new residents commencing work after April 5, 2025.
Support for Families and Benefits Adjustments
To assist families, the income threshold for Child Benefit eligibility will increase by £10,000, extending support to households earning up to £90,000.
Most benefits are set to rise in line with inflation as of September 2024, with reciprocal benefits increasing by 1.7% (UK CPI) and others by 2.2% (Isle of Man CPI).
Notably, the Basic State Pension and the Manx State Pension will both see a 4.1% increase, raising weekly payments to £176.45 and £251.30 respectively. The Winter Bonus will increase by £50.
Investment in Health and Social Care
The Department of Health and Social Care is to receive an additional £25 million in funding. This investment focuses on enhancing NHS services, particularly improving access to GPs and community dental care.
Our health service is in desperate need of a boost and I for one am eagerly awaiting to see how these funds are put to use.
Enhancements in Education
Education funding will see an uplift of £8.3 million, which includes an extra £3 million dedicated to implementing the Childcare Strategy. This strategy aims to provide additional financial support to working families, facilitating better access to childcare services and promoting early childhood development.
Selfishly, I’m hoping the new roof at St Ninian’s doesn’t cause too many additional traffic issues!
Digital Transformation and Government Efficiency
A sum of £5.3 million is earmarked for digitizing and automating government processes. This investment is intended to enhance efficiency across various departments, streamline services, and reduce administrative overheads, ultimately leading to improved public service delivery.
It’s fair to say that some processes with government (tax returns and payroll submissions, to name two) are clunky, and this seems an area where quick wins could be achieved.
Capital Projects and Infrastructure Development
The budget outlines a capital program totalling £300 million over the next five years, with £87.4 million allocated for 2025-26. Key projects include over £1 million for upgrading sports facilities ready for the Island Games in 2029 and £6.1 million dedicated to road maintenance and improvements.
The long-awaited Ballasalla bypass might even become a reality!
Fiscal Strategy and Reserve Management
To balance the budget for 2025-26, the government plans to withdraw up to £110.6 million from reserves, with a strategy to reduce this reliance to £49.7 million by 2029-30. Projections indicate that the island’s reserves will grow to £2 billion, and the National Insurance Fund is expected to surpass £1 billion by 2030.
Pension Reforms Amidst Demographic Changes
In response to a rapidly ageing population and concerns about the sustainability of the National Insurance Fund, the Treasury Minister had proposed abolishing the triple lock mechanism for state pensions.
Currently, this ensures that pensions rise annually by the highest of average wage increases, inflation, or 2.5%.
Changes to the state pension were removed from the budget and instead will be debated separately.
We will continue to monitor any proposed changes and how these may impact clients. In the interim, it is arguably more important than ever to have a retirement plan that does not solely rely on the state.
