Guernsey provides a high standard of living, with a good education system, stable government, good infrastructure and a convenient location close to the UK and Europe.
Guernsey is independent and self-governing, renowned for being a safe place to live with beautiful beaches, scenery and cliff walks.
For many it is surprisingly easy to become a resident of Guernsey. Individuals with a British passport have an automatic right of abode and can buy and live in any of the many fantastic properties available on the “open market”.
Individuals other than British passport holders can also obtain a right to live here and occupy open market accommodation, via an entrepreneur visa depending on circumstances. Generally, individuals who can obtain a “leave to enter” the UK can also reside in Guernsey on making an application to do so.
Guernsey is a very attractive place to live because of its proximity to the UK and Europe, its safe environment and easy availability of property. In addition to this, the tax system is relatively benign compared to many other jurisdictions.
Guernsey
Tax residency
Guernsey tax residence is based on the number of days an individual spends in the Island in a tax year. A “day” is treated as being spent in Guernsey if an individual is in the Island at midnight. There are a number of categories of residence for Guernsey tax purposes:
Resident only
An individual is regarded as “resident only” in Guernsey for tax purposes in a calendar year if they:
(a) spend 91 days or more in Guernsey during the year, or
(b) spend 35 days or more in Guernsey in that year and, during the four preceding years, spent 365 days or more in Guernsey and spend 91 days or more in a second jurisdiction during the year.
Individuals who are resident only are, as an alternative to paying 20% tax on their worldwide income, able to elect to pay a "standard charge", currently set at £50,000. This covers all Guernsey tax due upon that individual's non-Guernsey source income. The standard charge also “franks” tax due on up to £250,000 of Guernsey source income.
If Guernsey source income exceeds £250,000 further tax is due at 20% and no deductions are available on this income.
Solely Resident or Principally Resident
An individual is solely resident in Guernsey if they are “resident only” as above, but do not spend more than 91 nights in a second jurisdiction during the year. An individual is “principally resident” in a calendar year if:
(a) they spend at least 182 days in Guernsey during the year, or
(b) they spend at least 91 days in Guernsey during the year and, during the four preceding calendar years, have spent at least 730 days in Guernsey, or
(c) take up permanent residence in Guernsey (meaning they are resident only in the year under review and solely or principally resident in Guernsey in the immediately preceding year).
An individual who is “solely” or “principally resident” in Guernsey is liable to Guernsey income tax on their total worldwide income at a flat rate of 20% unless tax capping applies.
Non-Resident
A non-resident is broadly only liable to Guernsey income tax on Guernsey source income such as employment or property income. Passive investment income is generally not taxable.
Tax Capping for Guernsey Residents
Depending on the individuals Guernsey tax residence classification, described above, a Guernsey resident may cap their annual tax liability, viz;
- Foreign income tax cap of £160,000. This is for non-Guernsey source income only. Guernsey source income remains subject to 20% tax. Guernsey bank interest is not considered Guernsey source.
- Annual tax cap of £320,000. A global cap utilised by individuals with substantial Guernsey source income.
- Open Market Cap of £60,000. Available for up to the first four years of Guernsey residence. Requires the purchase of an open market property within 12 months before or after taking up permanent residence. The purchase must generate minimum document duty or anti‑avoidance duty of £50,000 (property cost of £1.4m). From 1 January 2024, where an individual pays at least £50,000 document duty (under the document duty anti‑avoidance provisions) to purchase the entire share capital of a company that holds the open market property, they may claim the open market tax cap.
- Alderney property tax cap of £60,000 is available from 2025 onward, the requirement being payment of a minimum £50,000 document duty, share transfer duty or leasehold duty on the purchase of an Alderney residential property after January 2025, with a property cost of circa £900k. The individual must take up permanent residence in Alderney either 12 months before or after purchase. The cap is available for the first year of permanent residence and the following three years.
- Guernsey (including Alderney) source property income and withdrawals from Guernsey pensions, are taxable in addition to the above tax caps.
Double tax treaty and pensions
Under the terms of the Double Tax Treaty with the UK, pensions are only taxable in the taxpayer’s country of residence. For individuals becoming resident in Guernsey, their UK income tax liability will be replaced by a Guernsey income tax liability and the rate of tax will fall from a maximum 45% to 20% providing a Double Taxation application is submitted to HMRC.
Furthermore, as the pension income is non-Guernsey source, Guernsey tax due on the UK pension income is satisfied by payment of the foreign income tax cap or the standard charge for resident only individuals. This often means the effective rate is significantly less than the Guernsey standard rate of 20%.
In addition it is possible for Guernsey residents to transfer UK pension schemes to a Guernsey scheme.
We have described above some of the non-financial reasons for living in Guernsey and in conclusion we believe that the island, with its picturesque beaches, stunning cliffs, winding country lanes and a way of life that echoes of days gone by, offers much more than just a beneficial tax climate. Guernsey is a lifestyle choice for many where the work life balance is very much in focus.
Please refer to our Living in Guernsey factsheet for further information on the Guernsey tax system.
Jersey
Tax residency
Guernsey tax residence is based on the number of days an individual spends in the Island in a tax year. A “day” is treated as being spent in Guernsey if an individual is in the Island at midnight. There are a number of categories of residence for Guernsey tax purposes:
Resident only
An individual is regarded as “resident only” in Guernsey for tax purposes in a calendar year if they:
(a) spend 91 days or more in Guernsey during the year, or
(b) spend 35 days or more in Guernsey in that year and, during the four preceding years, spent 365 days or more in Guernsey and spend 91 days or more in a second jurisdiction during the year.
Individuals who are resident only are, as an alternative to paying 20% tax on their worldwide income, able to elect to pay a "standard charge", currently set at £50,000. This covers all Guernsey tax due upon that individual's non-Guernsey source income. The standard charge also “franks” tax due on up to £250,000 of Guernsey source income.
If Guernsey source income exceeds £250,000 further tax is due at 20% and no deductions are available on this income.
Solely Resident or Principally Resident
An individual is solely resident in Guernsey if they are “resident only” as above, but do not spend more than 91 nights in a second jurisdiction during the year. An individual is “principally resident” in a calendar year if:
(a) they spend at least 182 days in Guernsey during the year, or
(b) they spend at least 91 days in Guernsey during the year and, during the four preceding calendar years, have spent at least 730 days in Guernsey, or
(c) take up permanent residence in Guernsey (meaning they are resident only in the year under review and solely or principally resident in Guernsey in the immediately preceding year).
An individual who is “solely” or “principally resident” in Guernsey is liable to Guernsey income tax on their total worldwide income at a flat rate of 20% unless tax capping applies.
Non-Resident
A non-resident is broadly only liable to Guernsey income tax on Guernsey source income such as employment or property income. Passive investment income is generally not taxable.
Tax Capping for Guernsey Residents
Depending on the individuals Guernsey tax residence classification, described above, a Guernsey resident may cap their annual tax liability, viz;
- Foreign income tax cap of £160,000. This is for non-Guernsey source income only. Guernsey source income remains subject to 20% tax. Guernsey bank interest is not considered Guernsey source.
- Annual tax cap of £320,000. A global cap utilised by individuals with substantial Guernsey source income.
- Open Market Cap of £60,000. Available for up to the first four years of Guernsey residence. Requires the purchase of an open market property within 12 months before or after taking up permanent residence. The purchase must generate minimum document duty or anti‑avoidance duty of £50,000 (property cost of £1.4m). From 1 January 2024, where an individual pays at least £50,000 document duty (under the document duty anti‑avoidance provisions) to purchase the entire share capital of a company that holds the open market property, they may claim the open market tax cap.
- Alderney property tax cap of £60,000 is available from 2025 onward, the requirement being payment of a minimum £50,000 document duty, share transfer duty or leasehold duty on the purchase of an Alderney residential property after January 2025, with a property cost of circa £900k. The individual must take up permanent residence in Alderney either 12 months before or after purchase. The cap is available for the first year of permanent residence and the following three years.
- Guernsey (including Alderney) source property income and withdrawals from Guernsey pensions, are taxable in addition to the above tax caps.
Double tax treaty and pensions
Under the terms of the Double Tax Treaty with the UK, pensions are only taxable in the taxpayer’s country of residence. For individuals becoming resident in Guernsey, their UK income tax liability will be replaced by a Guernsey income tax liability and the rate of tax will fall from a maximum 45% to 20% providing a Double Taxation application is submitted to HMRC.
Furthermore, as the pension income is non-Guernsey source, Guernsey tax due on the UK pension income is satisfied by payment of the foreign income tax cap or the standard charge for resident only individuals. This often means the effective rate is significantly less than the Guernsey standard rate of 20%.
In addition it is possible for Guernsey residents to transfer UK pension schemes to a Guernsey scheme.
Team
The business employs 13 qualified Chartered Tax Advisers most of whom have years of experience working in both Guernsey and UK tax. The business also employs qualified accountants to assist with its accounting function.