Minor Changes To Personal Income Tax In Gibraltar Budget

by Robert Lee, Tax-News.com, London

27 June 2003

This week saw the government of Gibraltar deliver its 2003-04 budget, which allows for minor reductions in personal income tax - including a 2% reduction in the top rate of tax - and paints a healthy picture of the economy in general.

According to National Income Accounts figures for the period 1996/97 to 2000/01, the economy of Gibraltar grew some 26%. In addition, the 'Input Output' study conducted by Professors Fletcher and Wanhill has concluded that the local economy is "thriving and energetic".

Finance and tourism remain the twin pillars of the economy, with finance sector jobs at all time high despite uncertainty over new EU laws. Particular areas of growth in this field have been the insurance and fund management sectors. Overall, employment is up 10% since 1996, whilst visitor numbers rose by 4.5% in 2002 to 7.6 million.

The international gaming sector reportedly also continues to grow, and now employs 600 people.

On the economic front, the government's budget surplus last year was £5.3 million, and is estimated this year at £6.7 million.

In respect of personal taxation, the following changes have been made:

• Top rate of tax reduced from 47% to 45% above £23,000.
• Tax Credit of £230 for incomes of less than £8,000 per annum.
• £1,000 transferred from 30% tax band to 17% tax band.
• £3,000 transferred from 35% tax band to 30% tax band.
• Home Purchase Allowance of £4000 (worth £350 for those whose income reaches the 35% bracket, and £300 for those whose income reaches the 30% bracket).

Tax bands have been restructured so that now there are four brackets as opposed to five. The four levels are placed at 17%, 30%, 35% with the top rate at 45%.

Other measures contained within the budget include:

• All allowances increased by 2.5%
• Senior Citizen's total Tax Exemption threshold increased to £7,195. Reductions up to £13,480.

Tax reduction on single person's income:

• £8,000 = £794
• £12,000 = £842
• £15,000 = £915
• £20,000 = £1,036
• £25,000 = £1,238
• £35,000 = £1,738

And for Married Couples:

• £8,000 = £908
• £12,000 = £1,051
• £15,000 = £1,187
• £20,000 = £1,452
• £25,000 = £1,587
• £35,000 = £2,087

Other allowances and savings include:

• Personal allowance £1,450 to £2,430
• Wife Allowance £1,350 to £2,275
• One Parent Family £1,350 to £2,275
• Child Allowance £500 to £850
• 1st child studying abroad £560 to £955
• 2nd child £450 to £795
• Private Nursery Allowance £0 to £875
• Home Purchasers Allowance £10,000 to £14,000
• Medical Insurance Relief £0 to £515

Recommended