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Tax Cap

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Sections 39B, 39C, 39D and the Sixth Schedule of the Income Tax Law limit the amount of tax payable by an individual resident in Guernsey/Alderney.

A summary of the tax caps and the impact these will have on your Social Security Contributions are provided below. If you would like to see more in depth detail, please refer to the download section.

The tax cap is based on the level of "qualifying" and/or "non-qualifying" income you have. If you have enough income to qualify for the tax cap, you won't be given any personal allowances. The cap is also proportioned in the year of your arrival in, or departure from, Guernsey.

If you are able to take advantage of the cap, you don't need to complete the personal return each year with details of all of your income, but you can complete a Tax Cap form which is only 1 page long.

  • Cap on qualifying income

    • Generally qualifying income is any income you have from outside of Guernsey and Guernsey bank interest. The limit of tax payable on this income is £130,000 for 2019. No Guernsey income (other than bank interest) can be taken into account in this cap, so if you do have other income from Guernsey you will need to pay tax at 20% on this in addition to the £130,000 (subject to a further cap on qualifying and non-qualifying income - see below). Any income from Guernsey is treated as "non-qualifying income".
    • Example
    • Mr A is resident in Guernsey and has the following income:
    • Qualifying income
    • UK investments                   £ 400,000
    • French income                     £ 640,000
    • Guernsey Bank Interest      £ 10,000
    • Non-Qualifying income
    • Guernsey loan interest         £ 15,000
    • Total                                        £ 1,065,000
    • If the tax cap was not applied he would need to pay tax of £213,000 (£1,065,000 taxed at 20%)
    • With the cap applied, his tax bill would be:
    • Qualifying income - tax capped at £130,000
    • Non-qualifying income          - £15,000 taxed at 20% £ 3,000
    • Total tax due                             £133,000
  • Cap on qualifying and non-qualifying income

    • If you have a high level of income from both in and outside of Guernsey, or just Guernsey income, then the maximum tax that you pay is capped at £260,000 for 2019 (but this does not include income from land and property in Guernsey; tax is payable on this income in addition to the cap).
    • Example
    • Mr B is resident in Guernsey and has the following income
    • Qualifying income
    • UK investments                         £ 350,000
    • French income                           £ 640,000
    • Guernsey Bank Interest            £ 10,000
    • Non-Qualifying income
    • Guernsey wages                           £ 425,000
    • Guernsey rental income              £ 19,000
    • Guernsey loan interest                £ 250,000
    • Total                                                £ 1,694,000
    • If the cap was not applied he would pay £338,800 (£1,694,000 taxed at 20%)
    • With the cap applied, his tax bill would be:
    • Qualifying and non-qualifying income - capped at £260,000
    • Tax on Guernsey rental income           £19,000 at 20% £ 3,800
    • Total tax due                                            £263,800
  • Individuals resident in Alderney

    • A resident of Alderney, who hasn't previously been capped as above, will be capped at £50,000 on their "Alderney qualifying income", for each year from 2016 to 2025. If they have been capped previously then the limits of £130,000 and £260,000 continue to apply.
    • For an Alderney resident their "Alderney qualifying income" is income from all sources, regardless of where it is from, except for any income from Guernsey/Alderney land and property, which is taxable in addition to the cap.
    • Example
    • Mr C is resident in Alderney and has the following income, he has not previously been capped
    • Alderney qualifying income
    • UK investments                    £ 150,000
    • French income                      £ 50,000
    • Guernsey Bank Interest       £ 10,000
    • Guernsey director's fees      £ 105,000
    • Guernsey loan interest         £ 25,000
    • Alderney non-qualifying income
    • Guernsey rental income        £ 12,000
    • Total                                          £352,000
    • His tax bill would be
    • Alderney qualifying income    £50,000
    • Guernsey rent                           £12,000 at 20% £ 2,400
    • Total tax due                             £52,400
  • Individuals resident in Guernsey who have purchased a Part A open market property (The Open Market Tax Cap)

    • From 1 January 2018, a new resident to Guernsey (who has not been resident in Guernsey in the previous 3 years) may claim a tax cap of £50,000, for the year they arrive in Guernsey and the following 3 years.
    • This cap can only be claimed if the individual has paid £50,000 or more in document duty on the purchase of a property, that is on Part A of the Open Market Register, and that property is purchased within 12 months (either before or after) they take up permanent residence in Guernsey.
    • This Open Market Tax Cap applies in respect of both qualifying and non-qualifying income as defined in point 1. Tax due on income arising from Guernsey land and property would need to be paid in addition to the Open Market Cap.
  • Effect on Social Security contributions

    • If you are self-employed, non-employed, or over pension age and elect to take advantage of the Tax cap, you will be assessed at the maximum weekly rate for the payment of Social Security contributions. 
    • This will also affect payment of contributions in respect of your spouse if they are self-employed, non-employed or over pension age, and you are jointly assessed for Tax purposes.  In this instance, if their assessable income is below the maximum amount of £149,760 they should provide details of their worldwide income (for the relevant year of charge), so that this can be considered for the basis of their contribution liability.
    • Self-employed£316.80
      Non-employed£282.60
      Over Pension age£ 92.39

Downloads

Income Tax (Guernsey) Law, 1975 - Section 39B Income Tax (Guernsey) Law, 1975 - Section 39C Income Tax (Guernsey) Law, 1975 - Section 39D Income Tax (Guernsey) Law, 1975 - Sixth Schedule

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