The Hong Kong Government released the 2025/26 Budget in late February 2025, introducing targeted tax relief for individuals while largely maintaining Hong Kong’s simple and low‑tax regime. For employees and employers alike, the key changes relate to one‑off salaries tax relief and future adjustments to allowances and deductions.
Below is a practical summary of how the Budget affects salaries tax calculations and deductions for the 2025/26 and 2026/27 years of assessment.
- One‑Off Salaries Tax Reduction for 2025/26
For the year of assessment 2025/26, the Government proposed a one‑off 100% reduction of salaries tax, subject to a cap of HKD 3,000 per taxpayer.
Key points:
- The reduction applies to final salaries tax payable for 2025/26
- Maximum tax reduction: HKD 3,000 per individual
- The relief is automatic—no separate application is required
- Provisional salaries tax must still be paid on time; any excess will be refunded after final assessment
This measure provides modest but broad‑based relief, benefiting over two million taxpayers while keeping fiscal impact contained.
- Salaries Tax Calculation: What Remains Unchanged
Apart from the one‑off relief, the core salaries tax framework remains unchanged for 2025/26:
- Tax is computed on net chargeable income or net total income, whichever is lower
- Progressive tax rates continue to apply, subject to the standard rate cap
Progressive rates:
| Net chargeable income (HKD) | Tax rate |
| First 50,000 | 2% |
| Next 50,000 | 6% |
| Next 50,000 | 10% |
| Next 50,000 | 14% |
| Remainder | 17% |
Standard rates:
Two‑tiered standard rates (from 2024/25 onward)
| Net income (HKD) | Standard rate |
| First 5,000,000 | 15% |
| Amount above 5,000,000 | 16% |
- Income sources taxable under salaries tax (employment income, bonuses, allowances, share awards, etc.) remain the same
In practice, the one‑off reduction simply reduces the final tax payable, rather than changing how income is calculated.
- Deductions and Allowances: Looking Ahead to 2026/27
While no major deduction changes apply immediately in 2025/26, the Budget announced enhancements to allowances and certain deductions effective from 2026/27.
These include proposed increases to:
- Basic allowance
- Married person’s allowance
- Child allowance and additional child allowance (including extended claim period for newborns)
- Dependent parent and grandparent allowances
- Deduction ceiling for elderly residential care expenses
Common salaries tax deductions such as mandatory MPF contributions, self‑education expenses, and home loan interest remain available under existing rules.
For further details on the allowances, deductions, and applicable tax rate table for Hong Kong Salaries Tax, please refer to the link at https://www.ird.gov.hk/eng/pdf/pam61e.pdf.
- Practical Takeaways for Taxpayers
- Employees should factor in the HKD 3,000 cap when budgeting for 2025/26 tax payments
- Married couples under joint assessment should note that the cap applies per case, not per person
- Forward planning for 2026/27 may be beneficial, particularly for families supporting children or elderly parents
- Provisional tax planning remains important despite the one‑off relief
Final Thoughts
The 2025/26 Budget provides short‑term salaries tax relief while signalling incremental support for households in future years through higher allowances. Although the tax savings are modest, the measures reinforce Hong Kong’s continued commitment to a stable and predictable personal tax system.
If you would like assistance reviewing your salaries tax position, provisional tax planning, or personal assessment options, please feel free to contact us with any questions.
