PAULINE SMITH,managing director of Greenwave Accountants based in Colby, assesses the Isle of Man Budget in this special report for Business News.

The Budget showed the positive news of the island, but challenges still need to be overcome.

This is the island’s 34th year of unbroken growth, with the economy growing at 5 per cent, low unemployment and reserves of £1.6 billion, but an underlying deficit (expenses exceeding income) of £80 million is forecast for the next financial year.

In addition the public sector pension fund will be depleted by 2020/21 and from then on this cost will need to be met through annual revenue, putting further pressures on savings and efficiencies across departments.

The minister has laid out a five year plan to decrease the deficit through increased revenues from economic growth and cost savings within Government.

Within the budget is £25m of unallocated savings, yet to be found from departmental budgets.

In addition to a new cross government SAVE team, an online portal will be open later this year for everyone, including the general public, to offer ideas and opportunities to deliver improvements and cost reductions across Government.

The New Manx Pension is planned to replace the state pension from 2019 and the welfare review gives potential for complete overhaul of the current social security benefits programme.

Whilst the effects of BREXIT are still an unknown quantity, the Government has set aside a £1m BREXIT fund, which will increase over time to deal with the associated costs.

The tax headlines from this years’ budget were :

Personal income tax allowance increased by £2,000 from £10,500 to £12,500 (and to £25,000 for a jointly assessed couple) but removing age related allowance completely.

Level of 10 per cent tax rate band reduced to £6,500.

Mortgage and loan interest relief maximum deduction reduced to £5,000 per annum.

Maximum permitted deduction for private nursing expenses to rise to £12,500.

Tax cap being increased to £150,000 from April up to £200,000 by 2020.

Benefit in kind incentive for cycling to work.

Self-employed class 2 National Insurance contributions to be abolished but increase in class 4 contributions to 11 per cent from 2018.

No change in employers or employees NI contributions.

Soft drinks levy (’sugar tax’) to be introduced.

Child benefit raised by two per cent.

The increase in personal allowance but decrease in 10 per cent rate means a jointly assessed couple saving £400 per annum in tax (£200 per year for a single person), compared to the current 2016/17 tax year, although the mortgage interest reduction may negate this for many.

Meanwhile for an older person, the loss in personal allowance means there is no effect.

Compared to the UK an employed person earning £25,000 is still better off in tax by around £850 per year.

To dig a little deeper

under the budget:

Emphasis remains on inward investment which is imperative but no specific assistance for home grown entrepreneurs and businesses

It did not contain any specific action for agricultural industry or renewable energy

No commitment from Government to use Manx based businesses subject to tender controls

Further work permit reforms will be vital to grow the economically active population and while the financial sector is beginning to see the benefits of this, other sectors such as private nursing and care will need reform to meet the needs of our ageing population.

As the Treasury minister stated we are an island of enterprise and opportunity, and by becoming a collaborative and connected economy, working together for the strength of the island, we can take responsibility for the wellbeing of us all.