Tax Planning
Hong Kong’s 2026-27 Budget — What Individuals Should Know for Tax Planning
Hong Kong’s latest Budget introduces sizeable increases in allowances and exemptions starting assessment year 2026/27 — here’s how individuals can plan now to benefit.
By NomadicTax Research Team • 6 min read • August 12, 2026
## Overview of Key Changes
Hong Kong’s 2026-27 Budget (effective from the year of assessment 2026/27) introduces several enhancements for individuals, including:
- **Basic allowance** and **single parent allowance** increased from HK$132,000 to HK$145,000;
- **Married person’s allowance** raised from HK$264,000 to HK$290,000;
- **Dependent parent/grandparent allowances** increased, for those aged 60+ or with disability (from HK$50,000 to HK$55,000), and those aged 55-59 from HK$25,000 to HK$27,500;
- **Child allowance** and **additional allowance for newborns** each increased from HK$130,000 to HK$140,000 per child;
- **Deduction ceiling** for elderly residential care expenses increased from HK$100,000 to HK$110,000.
([ird.gov.hk](https://www.ird.gov.hk/eng/ppr/archives/26030402.htm?utm_source=openai))
Also, there is a **one-off reduction** of **100% of salaries tax, profits tax, and tax under personal assessment** for the **2025/26 assessment year**, subject to a ceiling of HK$3,000 per case.
([ird.gov.hk](https://www.ird.gov.hk/eng/ppr/archives/26030402.htm?utm_source=openai))
## How to Use These for Effective Tax Planning
Here are actionable strategies to make the most of the Budget changes:
| Strategy | Why It Helps | Action Steps |
|---------|--------------|--------------|
| **Review your family structure** | Child and dependent allowances have increased; largest marginal benefit if you have young children or elderly dependents | Ensure registered dependents are claimed properly. If you expect new child or caring for parents, adjust declarations accordingly. |
| **Forecast income and deductions** | With allowances increased, timing deductions and charitable contributions may reduce marginal rate exposure | Accumulate deductible expenses in the assessment year when your marginal tax rate is higher. |
| **Consider residential care costs** | With higher deduction ceiling for expenses, elderly care costs are more effective | Keep invoices and documentation for qualifying care of parents/grandparents. |
| **Use the one-off reduction** | Even small taxable incomes may benefit up to the HK$3,000 cap | File returns for 2025/26 normally and check if final payable tax after deduction yields benefit. |
## Examples
- *Example A:* A married couple with two children and income just above the basic allowance will save more due to the new child allowances — previously each child was valued at HK$130,000, now HK$140,000. That increase reduces taxable income significantly.
- *Example B:* If you paid HK$100,000 in residential care for an elderly parent last year, the higher ceiling lets you deduct more, reducing tax payable.
## Important Deadlines & Compliance Notes
- Taxpayers should keep documentation and ensure declarations align with **assessment year 2026/27** (i.e. income earned 1 April 2026 to 31 March 2027).
- The one-off tax reduction applies to **2025/26 assessment year**, so returns for that year must be filed as usual.
- Watch for notices from the IRD on implementing legislated changes, and ensure you declare all dependents and eligible expenses.
## Summary
These Budget measures represent a **high-impact** opportunity to reduce tax especially for those with children, dependents, or elderly care expenses. By planning ahead, individuals can optimize deductions and allowance claims, arising in the 2026/27 assessment period, while also ensuring that they don’t miss out on the one-off tax relief for 2025/26.
**Category:** Tax Planning
**Author:** NomadicTax Research Team
**Read Time:** 5-8 min