Money matters – when you are moving to the Isle of Man

If you're moving to the Isle of Man, then you are likely to be thinking of how the move might benefit your career, quality of life and even financial circumstances. With a friendly tax regime and higher salaries in certain sectors than in the UK, you are likely to have a better 'final take home pay' and enjoy quality lifestyle at the same time.

At Locate, we work together with experts to provide you with insights and information to make your move as easy as possible and for this article, we asked Paul Hotchkiss of Hotchkiss Associates to round up vital tax info and tips to help you save money, when you decide to move to the Isle of Man.

1. You've left and are arriving – tax reporting

When you leave a country, you will have to comply with local rules and tell the tax authorities you have left and usually finalise your tax affairs there. On arrival on the Island, you and your spouse will have to complete a registration for Manx income tax form.

This contains basic information about you, your spouse, where you live, or propose to live, and your expected income and other relevant details. The sooner you do this the sooner the Income Tax Division will issue you with a tax reference number.

You may also have to obtain a national insurance number. This may involve a short interview with the Government. Once you are registered for income tax, an income tax return will be sent to your registered address for completion for the appropriate tax year.

Note: The tax year run from 6 April to 5 April the following year.

2. Registering for employment

Your employer will more than likely obtain a work permit to enable you to work. Every person who works on the island requires a work permit unless they are an Isle of Man worker. If you are self-employed or setting up a business, you can apply for a work permit directly. If you are in certain categories of employment, (eg those working in IT and e-business) you may fall into a work permit exemption. In addition, if you are immigrating to the Island, you will not need a work permit to work if you in doing so have satisfied the requirements under the island's immigration legislation.

Partners (Civil, Spouse or co-habiting partner) of an Isle of Man worker are eligible for an automatic 1-year work permit even if they have not yet secured employment. You can apply for this yourself online and must provide your partner’s Work Permit reference, personal details, employment details (if applicable), and proof of relationship to the IOM Worker (marriage/civil partnership certificate or the Cohabiting Partner Additional Information form). The cost for this permit is £60 and can be renewed annually. 

Once you have a work permit and you are registered for income tax, your employer will register you as an employee and you will receive a tax code for the income tax division. This denotes any deductions you are entitled to including personal allowances and will be relevant when calculating your tax on any salary. You may be interested in how employment income and employment benefits are taxed on the island and a useful guide can be found here.

3. Opening a bank account

The island has a number of well-known banks and opening an account should be relatively straightforward if you are well prepared. You will need to complete various forms and provide original identification documents, eg passport. If you have all the relevant documentation to hand, the process should be quick. You may also need to prove where your wealth has come from so it is a good idea to make sure you have answers to such questions. Most banks will not open a bank account until you have a residential address on the island.

Additionally, most institutions and professionals will need to identify you before they can deal with you, so it is a good idea to be prepared with this basic documentation when you meet investment advisers, accountants, lawyers and other service providers.

4. Minimising non-IOM taxes

Once you are an Isle of Man resident for tax purpose, you will be subject to Manx income tax on your worldwide income unless you benefit from the Key Employee Concession. Your employer may apply for this if you are a key employee. If this applies for three tax years, you will only pay Isle of Man income tax on your Isle of Man employment income and nothing else. Your employer may apply for this on your behalf: it is a good incentive. The effect of a worldwide basis of taxation is that you must report annually all your income (even if you have paid tax on such income in another country). For non-Isle of Man tax paid you will get credit for some of the tax paid against your Isle of Man liability.

Being the Isle of Man tax resident does not prevent you from also being treated as a tax resident in another country as well (depending on the tax rules in that country) or from being liable to tax in other countries because of your residence status there or the source of your income (which may arise in another country, eg non-Isle of Man rental income).

The Isle of Man does not impose any wealth or capital taxes: you can, however, be subject to capital taxes in other countries depending on the local laws in those countries and where assets are located.

5. Buying or renting?

You may choose to buy or rent a house on the Island or your employer may rent it for you. If your employer rents a property for you, you will pay tax on the benefit of having this accommodation provided to you as a part of your salary package. If you choose to rent, you will have to enter into a lease which typically lasts 12 months or more although shorter term leases are available: an estate agent will be able to help you.

Buying a house or flat may not be as easy, especially if you need to get a mortgage. This can take time but also if you do not have a credit history banks may not lend to you. It is important to build up a credit history so that when a bank starts to deal with you and undertakes its credit scoring you are able to satisfy their requirements. A credit history used to build a credit score is a record of your responsible payment of debts. To build such a history you need to make sure you monitor and keep credit card balances under control or eliminate them, pay bills and debts when they fall due and do not engage in risky activities.

6. Investing your money

The Isle of Man has a relatively low tax rate and with the absence of capital taxes, you are likely to have more disposable income after you have paid your Isle of Man income tax. This may give you more money to invest in stocks and shares. The Isle of Man has a relatively simple tax system and the legislation is not extensive. With no capital taxes you only need to worry about income and therefore you have a much wider freedom to invest than in other countries as far as tax is concerned in general terms. However, because of its benign tax system some investment returns can be treated as income so you need to check with your investment or preferably tax adviser, how investment returns are taxed.

We thank Hotchkiss Associates private client team for contributing their insights. For more information about their tax and other services, please click here.

If you feel inspired to make the move to the Island, contact a member of our team today to start your journey to the Isle of Man.