How does PAYE income tax work for employees in Gibraltar?

Question

Accepted Answer

Employers deduct income tax through PAYE under one of two systems: the Gross Income Based System (GIBS), which taxes gross income at rates from 6% to 28% with few deductions, or the Allowance Based System (ABS), which taxes income after allowances at 14%, 17% and 39%. The Income Tax Office assesses you under whichever produces the lower bill.
Tax year and registration
The Gibraltar tax year runs from 1 July to 30 June. Employers register new employees with the Income Tax Office (paye.registration@gibraltar.gov.gi) using the employment contract issued by the Department of Employment and the employee's ID card or passport. The employee is then issued a tax code and tax is deducted from each payment of wages.
Gross Income Based System (GIBS)
Gross assessable income of £25,000 or less: first £10,000 at 6%, next £7,000 at 20%, balance at 28%.
Gross assessable income over £25,000: first £17,000 at 16%, next £8,000 at 19%, next £15,000 at 25%, next £65,000 at 28%, with reduced marginal rates above that level.
Only limited deductions are available, such as medical insurance, approved pension contributions and first-time home purchase.
Allowance Based System (ABS)
Taxable income (assessable income less allowances): first £4,000 at 14%, next £12,000 at 17%, balance at 39%.
Allowances include a personal allowance of £3,455, spouse allowance of £3,455, single parent allowance of £5,800, child allowances and mortgage interest relief.
Which system applies
The Income Tax Office calculates the year-end assessment on the system that is most beneficial to the taxpayer. As a worked example, a single person on £35,000 pays about £6,740 under GIBS (16% on £17,000, 19% on £8,000, 25% on £10,000). Under ABS, after the £3,455 personal allowance, the same person would pay roughly £8,660, so GIBS is lower. ABS tends to benefit people with substantial allowances such as mortgage interest or several children.
Low earners
Individuals with assessable income below the low-income threshold, cited for 2025/26 as £11,450, pay no income tax.
2026/27
The July 2026 Budget announced no changes to personal tax rates.
Non-residents
Frontier workers resident in Spain are taxed in Gibraltar on employment exercised in Gibraltar, deducted through PAYE in the normal way. Allowances available to non-residents under ABS are more limited.

How does PAYE income tax work for employees in Gibraltar?

Short answer

Detailed answer

Gross Income Based System (GIBS)

Allowance Based System (ABS)

Example