Tax Planning
Tax Incentives and Allowance Updates in Hong Kong’s 2026-27 Budget
Hong Kong’s 2026-27 Budget introduces meaningful tax relief for individuals and businesses, including one-off deductions, enhanced allowances, and expanded child benefits – key for both residents and digital nomads.
By NomadicTax Research Team • 5-8 min read • August 15, 2026
## Overview of Key Budget Measures
Hong Kong’s 2026-27 Budget brings several tax changes effective for the year of assessment 2026/27, with some measures applying immediately to 2025/26 final assessments. ([ird.gov.hk](https://www.ird.gov.hk/eng/tax/budget.htm?utm_source=openai))
Here are the highlights:
- A **one-off 100% reduction** in final tax for **profits tax**, **salaries tax**, and **personal assessment** for 2025/26, subject to a **HK$3,000 limit per case**. ([ird.gov.hk](https://www.ird.gov.hk/eng/faq/budget2026_27.htm?utm_source=openai))
- Increases in basic tax allowances: e.g. **Basic Allowance** raised from HK$132,000 to HK$145,000; **Married Person’s Allowance** from HK$264,000 to HK$290,000; **Child Allowance** for each child from HK$130,000 to HK$140,000. ([ird.gov.hk](https://www.ird.gov.hk/eng/tax/budget.htm?utm_source=openai))
- **Elderly residential care expense** deduction ceiling increased from HK$100,000 to HK$110,000. ([ird.gov.hk](https://www.ird.gov.hk/eng/tax/budget.htm?utm_source=openai))
- **Extension of additional child allowance**: for newborns, claimable for two years (formerly one), for children born on or after 1 April 2025. ([ird.gov.hk](https://www.ird.gov.hk/eng/tax/budget.htm?utm_source=openai))
- **Block extension scheme**: An extended due date for paper filing of Profits Tax returns with Accounting Date Code “D” (i.e. accounting periods ending between 1-Dec-2025 and 31-Dec-2025) from 17 August to **31 August 2026**; electronic filing extended from **17 September to 2 October 2026**. ([ird.gov.hk](https://www.ird.gov.hk/eng/pdf/bel26ea.pdf?utm_source=openai))
## Practical Impacts / Examples
| Scenario | Before Change | After Change | Net Benefit* |
|---|---|---|---|
| Salaries-tax payer filing jointly, two children | Basic Allowance: HK$132,000; Child Allowance: HK$130,000 per child | Basic Allowance rises to HK$145,000; Child Allowance to HK$140,000 per child | Reduced taxable income leads to lower rates. Savings vary by income level. |
| Elderly Residential Care expense deducted for parent aged 70, cost HK$120,000 | Deducted up to HK$100,000 | Now deductible up to HK$110,000 | HK$10,000 additional deduction, taxes reduced proportionally |
| Newborn born May 2025 – extra child allowance | Claimable only in year of birth (2025/26) | Now claimable in both 2025/26 & 2026/27 | Allowance doubled for those two years |
| Profits tax filer with “D” Accounting Date Code | Paper return due 17 Aug | Extended to 31 Aug; E-filing until 2 Oct | More time avoids late filing penalties |
\*Savings depend on marginal tax rate and other deductions.
## Who Should Act Now / Planning Tips
- **Affected individuals** should amend their tax returns where allowances or deductions changed. If you already filed your 2025/26 return, IRD will reassess for the one-off tax reduction—no need to apply. ([ird.gov.hk](https://www.ird.gov.hk/eng/faq/budget2026_27.htm?utm_source=openai))
- **Couples considering personal assessment** should compute whether filing jointly or separately gives the better outcome, given the tax reduction ceilings under personal assessment. ([ird.gov.hk](https://www.ird.gov.hk/eng/faq/budget2026_27.htm?utm_source=openai))
- **Tax representatives** need to leverage the Block Extension Scheme and TRP to facilitate clients’ submissions under new deadlines. ([ird.gov.hk](https://www.ird.gov.hk/eng/ese/bes.htm?utm_source=openai))
- **Income planning or accelerating expenses/donations** may help take advantage of expanded allowances before year-end.
## Comparison with Taiwan’s Current Climate (Brief)
While Hong Kong is offering reductions and expanded allowances, **Taiwan** continues to refine compliance and entity tax rules—recent regulatory changes include revisions to rules for **tax-exempt/privileged status**, edits to **inheritance & gifting tax laws**, and amendments to administrative acts like the **financial institutions’ reporting obligations**. ([mof.gov.tw](https://www.mof.gov.tw/htmlList/35?utm_source=openai))
## Conclusion
If you live in or do business in Hong Kong, the 2026-27 Budget offers several opportunities for tax optimization. Combining the one-off tax relief with increased allowances and deductions can meaningfully reduce your liabilities—especially if you’re a parent, caregiver, or small business owner. Ensure you use the extended deadlines, correctly elect personal assessment where beneficial, and consult a local expert where your income sources or filing status are complex.