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)
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)
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