What’s changing in the 2026-27 Budget for Hong Kong
The Financial Secretary’s 2026-27 Budget introduced major changes that take effect from the year of assessment 2026/27:
- A one-off tax reduction of 100% of the final profits tax, salaries tax, and personal assessment for the year of assessment 2025/26—capped at HK$3,000 per case. (ird.gov.hk)
- Higher allowances: Basic, married person’s, single parent, child, additional child, dependent parent/grandparent, and elderly residential care expense deductions are all increased. For example, basic allowance rises from HK$132,000 to HK$145,000, married person’s from HK$264,000 to HK$290,000. (ird.gov.hk)
- The claim period for additional child allowance for newborns is extended from one year to two years. (ird.gov.hk)
What this means in practice: savings examples
| Scenario | Pre-Budget (2025/26) tax & allowances | Post-Budget (2026/27 & one-off) situation |
|---|---|---|
| A single taxpayer with one child, dependent parent aged 65 | Basic allowance HK$132,000 + child allowance + dependent parent allowance | Basic allowance HK$145,000; child allowance HK$140,000; dependent parent allowance HK$55,000; plus potential one-off HK$3,000 reduction on 2025/26 final tax. |
| Married couple both earning salaries, with two children under 5 | Married person’s allowance HK$264,000; child allowances 2×HK$130,000 | Married person’s HK$290,000; child allowances 2×HK$140,000; etc. |
A worked example provided by the IRD shows a married couple could reduce tax payable from HK$17,960 to a refund of HK$7,780 when combining the allowance increases with the one-off reduction. (ird.gov.hk)
Actionable guidance for taxpayers
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File as usual for 2025/26; the one-off reduction will be reflected in your final assessment by IRD automatically, subject to the cap. (ird.gov.hk)
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Review your dependents and allowances—if you have dependent parents/grandparents aged 55-59 or 60+, or newborns, plan accordingly to maximize new allowances. For instance, dependent parent aged 55-59: allowance moves from HK$25,000 to HK$27,500; aged 60+: from HK$50,000 to HK$55,000. (ird.gov.hk)
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Estimate your elderly residential care expenses: ceiling increases from HK$100,000 to HK$110,000 per eligible person. Expenses beyond the old cap, but within new cap, may bring deduction. (ird.gov.hk)
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Understand timing for newborns’ allowances: The extension to two years helps parents of newborns claim additional child allowance for longer. If your child was born in 2025/26, you may now benefit. (ird.gov.hk)
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Use the IRD’s tax calculator on GovHK to compare scenarios under old vs new allowances/tax, to assess whether personal assessment (if you have profits or rental income) or joint vs separate is better. (ird.gov.hk)
Summary: Who gains most?
- Families with children, especially newborns, due to higher child allowances and extended claim period.
- Those supporting elderly parents/grandparents because of higher dependent parent allowances.
- Individuals incurring elder care expenses near old cap—extra deduction possible.
- Businesses/entities for 2025/26 profit tax will benefit from the one-off reduction.
With inflation and cost of living pressures, these adjustments can offer significant relief if you structure deductions and allowances correctly under the new rules.