New health levy would raise up to £28m - Treasury

A proposed health and social care levy on the Isle of Man would generate up to £28m a year in additional funding for future services, the Treasury has said.

Plans for the new charge, which would be deducted from people's incomes via the existing tax return system, is in response to a 14% year-on-year rise in health costs.

The Treasury has launched a consultation on the proposals for the 2% levy, which would also apply to income which is currently not subject to taxation.

It follows a commitment made in 2024 by Treasury Minister Alex Allinson to replace a 2% rise in the higher rate of income tax to be ringfenced for health.

The higher tax rate was brought down by 1% to 21% in the 2025-26 financial year in Allinson's latest budget, with additional money in the annual NHS Allocation from National Insurance contributions plugging the gap.

Manx Care is currently facing an overspend of up to £20m for the 2024-25 financial year, with approval of that additional funding delayed at the March sitting of Tynwald.

The 2019 Sir Jonathan Michael report on the future of health services, which led to the creation of Manx Care as an arm's length health care provider, recommended a funding increase of 3.03% on top of the base inflation rate each year.

The Treasury said the allocated funding of £387.4m for 2025-26 meant health and social care spending made up 26.6% of overall government expenditure, equating to £4,583 of the £17,249 spent per head of population.

The new levy would raise about £8m more than the previous 2% income tax rise had been expected to, it said.

The levy, which would apply regardless of age, would see people taxed on income, including some not currently subject to personal income tax such as lump sums on retirement, war pensions, TT homestay payments, mortgage interest relief, and several social security benefits.

The plan would see an element of earnings "free" from the charge, following the same principle as the personal allowance system, and would be capped at a maximum of £5,000 a year for the highest earners.

A new law would have to be passed to allow for the levy to come into force and be ringfenced solely for healthcare funding, which meant the charge could not be implemented until 2027-28 at the earliest, the Treasury said.

The document also asks for views on the Immigration Health Surcharge, for those moving to the island to live on the relevant visa, which is currently being progressed by the government.

It asks whether that should be extended to all new residents including those from the Common Travel Area, and if it should be paid by everyone or "just on those who are less likely to be economically active".

The 12-week consultation on the proposals is available online until 18 June.

Read more stories from the Isle of Man on the BBC, watch BBC North West Tonight on BBC iPlayer and follow BBC Isle of Man on Facebook and X.