Guernsey

Guernsey’s tax system can be attractive for individual’s relocating to the island.  Kery features include:

• The maximum rate of income tax is 20%
• There are various tax caps available to Guernsey residents
• No capital gains tax
• No inheritance tax or estate taxes
• No wealth taxes
• No VAT

Guernsey’s 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 but generally an individual is resident in Guernsey in they spend 91 says or more in Guernsey during the year.

A non-resident is broadly only liable to Guernsey income tax on Guernsey source income such as employment or property income. 

Depending on an individuals Guernsey tax residence classification may cap their annual tax liability:

• 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.  This is a global tax cap utilised by individuals with substantial Guernsey source income.
• Open market tax cap.  This is available for up to the first four years of Guernsey residence and requires the purchase of an open market property generating document duty of £50,000 or more (property cost of circa £1.4m).
• Alderney property tax cap. This is available for up to the first four years of Alderney residence and requires the purchase of residential property in Alderney generating document duty of £50,000 or more (property cost of circa £900k)

For individuals whose residence classification is ‘resident only’, as an alternative to paying 20% tax on their worldwide income, they can elect to pay a “standard charge”, currently set at £50,000.  This covers all Guernsey tax due upon their non-Guernsey source income and it “franks” tax due upon up to £250,000 of Guernsey source income.

Guernsey social security contributions are based on an individual’s annual taxable income. 

Annual upper and lower social security contribution income thresholds are as follows (with no contribution on income above or below the respective threshold):

• 2026 Upper earnings limit                            £196,560
• 2026 Lower earnings limit                           £9,984

Guernsey has three individual classifications for social security purposes:

• Employed persons – broadly an employee is subject to a 7.5% contribution and their employer a 7.1% contribution on the employee’s gross earnings (subject to thresholds above).
• Self-employed persona – a self-employed individual is subject to a 12.4% contribution based on their net profit for the year (subject to thresholds above).
• Non-employed persons – all non-employed individuals with income above £24,960 have an allowance of £11,122 deducted from their annual income.  The rate of contribution is 11.8% for those under pension age and 3.8% for those over pension age. Those with income below £24,960 are not subject to contributions. 

Individuals with a British passport have an automatic right of abode in Guernsey and can buy and live in any of the many fantastic properties available on the Open Market.

Guernsey maintains strict controls on the occupation of its housing stock.  These controls exist to protect and provide sufficient properties for residents.  Guernsey properties are categorised either as:

• Local Market – in most cases local market properties can only be occupied by locals, or non-locals who have been granted a residential permit, usually linked to essential employment.
• Open Market – Guernsey has approximately 1,700 open market properties that are usually at a price premium in comparison to a local market property.  A purchaser of an open market property should inform Population Management of their intended occupation to receive the appropriate right of abode.

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.

The standard rate of income tax for companies in Guernsey is 0%.

Certain regulated financial services companies are subject to Guernsey tax at 10% (such as banking and insurance) and income from certain activities is taxed at 20% (such as Guernsey rental income).