An NHS charge based on residents’ income could be introduced by 2027-28 to help fund consistently overspent health services, under proposals published by the Treasury.

A proposed levy of 2%, separate from income tax, could be imposed on all residents, irrespective of their age, according to a consultation launched today.

It could be charged on all income without any deductions or reliefs, including income that is currently exempt from income tax. This could include benefits like Income Support that are not currently taxable.

Treasury Minister Dr Alex Allinson said the NHS Levy aimed to create a ‘fair and equitable mechanism to contribute towards health funding without reliance on reserves’.

He insisted that ‘everything is on the table’ and whether those on benefits should be subject to the levy was ‘up for discussion’. ‘I’ve made no clear decisions about that,’ he told IoM Today.

For the purposes of the consultation document, it has been assumed that the rate of the levy would be 2%. The actual rate would be decided by Tynwald in a similar way to income tax rates.

It is estimated that this would raise £26-28 m per year for health funding.

A levy-free amount is proposed similar to the income tax personal allowance but there would also be a £5,000 cap on the maximum amount payable by an individual.

A 2p increase in the higher rate of income tax to 22% was introduced in last year’s Budget, with the aim being to ring-fence the estimated £20m of extra revenue it raised for the cash-strapped NHS.

The higher rate was reduced by 1p in this year’s Budget.

Treasury Minister Dr Alex Allinson said at the time that the tax rise was always going to be a temporary measure pending the introduction of a new NHS Levy.

But he subsequently admitted that devising such a levy was more complex than initially thought.

The earliest practical date the new charge could apply from is 2027-28, as new primary legislation would need to be enacted.

Treasury says a levy on all income means more of those who can potentially benefit from the health service would contribute to the cost of it.

It could be charged on income subject to double taxation relief i.e. earnings, pension or investment income from another country on which foreign income tax has already been paid.

And it could also be imposed on amounts which are currently exempt from income tax such as lump sums on retirement, war pensions, benefits in kind and TT Homestay.

Controversially, the consultation asks whether social security benefits including means tested benefits like Income Support and non-means-tested benefits Jobseeker’s Allowance and Incapacity Benefit should be subject to the levy as well as Employed Persons Allowance.

Income sheltered from income tax by additional allowances, deductions or reliefs applied such as single parent or disabled allowance, mortgage interest relief, charitable donations or nursing expenses could also be included.

If the charge was set at 2% and the levy- free threshold at £14,750, an income of about £265,000 per year for individuals would be required to reach a cap of £5,000.

Treasury points out that more than £100m has been allocated to the Manx NHS in Tynwald supplementary votes over the last decade. This includes the £20m extra that was blocked by members this month.

In his foreword to the consultation, Dr Allinson MHK says: ‘Over the last five years the spending on our health service has increased by an average of 14% per year - far faster than the rate of our island’s economic growth or the increase in government revenue.

‘A future Levy could act as additional revenue to support our efforts to fund a reformed NHS, providing effective and efficient services that are free at the point of need.’

The consultation is available to view and complete online at consult.gov.im