Guernsey, Channel Islands

Individual - Significant developments

Last reviewed - 01 July 2021

Guernsey operates a flat 20% income tax rate for all individuals resident in Guernsey or deriving Guernsey-source income.

The 2021 Guernsey Budget introduced a number of changes in the field of personal taxation.

The personal allowance has been increased from 11,575 British pounds sterling (GBP) to GBP 11,875, and earners of more than GBP 100,000 will have their allowance reduced by GBP 1 for every GBP 5 exceeding this limit. This withdrawal of allowances has been extended beyond the personal allowance (see the Deductions section).

Following the introduction of ‘tie-breaker’ clauses to certain double taxation agreements (DTAs) (including those with Jersey and the United Kingdom [UK]), the ‘flow through’ provisions in respect of distributions have been amended with retrospective effect from 1 November 2015. This will ensure that relief for underlying tax incurred by a company will flow through to the beneficial member on distribution if the company is either incorporated or controlled in Guernsey.

As the revised DTA between Guernsey and the United Kingdom comes into force in respect of Guernsey income taxes on 1 January 2020, the budget has clarified that an individual electing to pay the standard charge remains liable to Guernsey income tax on his or her worldwide income.

There has been an increase of the tax cap to GBP 130,000 for non-Guernsey source income and GBP 260,000 for worldwide income.

An encashment of a pension fund (i.e. both triviality payments and lump sum payments that are over the annual tax‐free lump sum limit) that comprises Guernsey tax relieved pension contributions shall be excluded from the income tax cap from 1 January 2020.