Overview of Latest Hong Kong Budget Tax Measures
The Budget for the year 2026-27 presents key changes to Hong Kong’s taxation system, especially in Salaries Tax, Profits Tax, and Personal Assessment. Major measures include: one-off 100% reduction of final tax for the 2025/26 year in these categories, subject to a HK$3,000 ceiling per case, and increased allowances like the Basic Allowance, Married Person’s allowance, Child Allowances, and Dependent Parent/Grandparent Allowance. (ird.gov.hk) (ird.gov.hk)
Highlights from 2026/27 Budget:
| Allowance Type | 2025/26 Amount | New from 2026/27 |
|---|---|---|
| Basic Allowance | HK$132,000 | HK$145,000 |
| Married Person’s Allowance | HK$264,000 | HK$290,000 |
| Child (1st-9th child) & Additional Child Allowance | HK$130,000 | HK$140,000 |
| Dependent Parent/Grandparent Allowance (age 60+ or eligible) | HK$50,000 | HK$55,000; similarly increased for 55-59 age bracket |
Also, the period for claiming Additional Child Allowance for newborns will extend from one year to two years, effective in the Year of Assessment 2026/27. (ird.gov.hk)
Compliance Essentials & Examples
What Taxpayers and Companies Must Do:
- For one-off reduction, no separate application is needed: the budget reduction will reflect in your 2025/26 assessment tax notice. (ird.gov.hk)
- Ensure claims for increased allowances are included when filing your 2026/27 provisional or final tax returns.
- Employers should update payroll & withholding systems to reflect higher allowances where applicable. Salaries Tax calculations may be affected.
- Tax representatives should watch for revised tax return forms and any new guidance issued by IRD.
Practical Example:
Mr. Chan & Mrs. Chan: Combined salaries tax situation example from Budget document. Under prior law, tax would be HK$11,920; with Budget changes (increase allowances + one-off tax reduction), tax payable drops to HK$7,960, saving HK$3,960. (ird.gov.hk)
If filing jointly under Personal Assessment, the savings may differ depending on incomes; some couples will benefit more by filing separately. The example demonstrates that the ceiling of HK$3,000 one-off reduction per case caps the benefit from that component. (ird.gov.hk)
Planning Tips for Maximizing Benefit
- Review your 2025/26 filings or estimated assessments to estimate the impact of one-off reduction and enhanced allowances.
- If you have children born during that year, note the birth date relative to allowances periods to best claim additional child allowance (especially for newborns).
- Consider whether Personal Assessment (combining incomes from salaries + profits) may yield greater savings vs separate assessments.
- For businesses or individuals with erratic income flows, check if varying allowances or the one-off reduction may shift you into a different tax band—plan accordingly.
Key Dates & Administrative Notes
- Allowance changes are effective for Year of Assessment 2026/27, which generally aligns with income year ending between April 2026 and March 2027.
- The one-off tax reduction applies only to final tax assessed for 2025/26. This does not affect provisional tax payments. (ird.gov.hk)
Bottom line: These Budget changes mean generous higher thresholds and an immediate one-off relief. By making sure you claim all allowances, and assessing the joint vs separate election options, many taxpayers can reduce their 2026/27 final tax bills significantly.