TL;DR

For the Hong Kong 2025/26 tax year, the salaries tax rate is a progressive rate of 2%–17% (or the 15% standard rate, whichever is lower). The basic allowance is HK$132,000, the married person’s allowance is HK$264,000, and each child adds a further HK$130,000. New deduction highlights for 2026: Voluntary Health Insurance Scheme (VHIS) premiums of up to HK$8,000 per year, and Mandatory Provident Fund (MPF) voluntary contributions (TVC) of up to HK$60,000. A person with an annual salary of HK$600,000, who is married with 2 children, may pay only around HK$9,000 in tax. This article walks you through the calculations step by step.

1. Progressive Tax Rate Bands (2025/26 Tax Year)

  • First HK$50,000: 2%
  • Next HK$50,000: 6%
  • Next HK$50,000: 10%
  • Next HK$50,000: 14%
  • Balance: 17%

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Or calculated at the 15% standard rate on net chargeable income (whichever is lower).

2. Main Tax Allowances (2025/26)

  • Basic Allowance: HK$132,000
  • Married Person’s Allowance: HK$264,000
  • Child Allowance (each, 1st–9th): HK$130,000
  • Extra Allowance for Year of Birth of Child: HK$130,000
  • Dependant Parent/Grandparent (aged 60 or above, living together): HK$57,500
  • Dependant Parent/Grandparent (aged 60 or above, not living together): HK$50,000
  • Single Parent Allowance: HK$132,000
  • Disabled Dependant Allowance: HK$75,000
  • Self-Education Expenses (ceiling): HK$100,000

3. Deductible Items (Directly Deducted from Assessable Income)

  • MPF Mandatory Contributions: HK$18,000
  • Voluntary Health Insurance Scheme (VHIS) Premiums: HK$8,000 per insured person
  • Qualifying Annuity Premiums + TVC: HK$60,000 (combined)
  • Charitable Donations: 35% of assessable income
  • Home Loan Interest: HK$100,000 (up to 20 years)
  • Elderly Residential Care Expenses: HK$100,000 per dependant

Real Calculation Example

Case: Annual salary HK$600,000, married, 2 children (living together), supporting parents (aged 60 or above, not living together), with MPF contributions.

Calculation Steps:

  1. Total Income: HK$600,000
  2. MPF Deduction: HK$18,000
  3. Married Person’s Allowance: HK$264,000
  4. Child Allowance: HK$130,000 × 2 = HK$260,000
  5. Dependant Parent Allowance: HK$50,000 (not living together)
  6. Net Chargeable Income = HK$600,000 − HK$18,000 − HK$264,000 − HK$260,000 − HK$50,000 = HK$8,000
  7. Tax Payable = HK$8,000 × 2% = HK$160

You only need to pay HK$160 in tax! This is the appeal of Hong Kong’s tax system.

If you have no allowances at all (single, no children, not supporting parents):

  • Net Chargeable Income = HK$600,000 − HK$18,000 − HK$132,000 (basic) = HK$450,000
  • Progressive Tax: HK$50,000×2% + HK$50,000×6% + HK$50,000×10% + HK$50,000×14% + HK$250,000×17% = HK$1,000 + HK$3,000 + HK$5,000 + HK$7,000 + HK$42,500 = HK$58,500
  • Standard Rate Calculation: (HK$600,000 − HK$18,000) × 15% = HK$87,300
  • Take the lower = HK$58,500

In other words: for the same annual salary of HK$600,000, the tax difference between being married with children and being single exceeds HK$58,000.

4. Tax Filing for the Self-Employed

The self-employed need to file Profits Tax rather than salaries tax (if you operate as a sole proprietor or partnership).

Profits Tax rate: 16.5% (limited company) / 15% (sole proprietor/partnership, first HK$2 million of profits at half rate, i.e. 7.5%)

Expenses the self-employed can deduct:

  • Office rent
  • Employee salaries
  • Utilities and internet charges (on a proportional basis)
  • Equipment depreciation
  • Professional fees (accountant’s fees, solicitor’s fees)

Key Reminder: Self-employed individuals who wish to apply for a mortgage must report their full income when filing (do not report too little income just to reduce tax), because banks look at tax returns when assessing mortgage applications.

5. Tax Filing Timetable

  • Early May: Inland Revenue Department issues tax returns
  • Early June (usually): Tax filing deadline (online filing can be extended by 1 month)
  • October: Inland Revenue Department issues tax assessment notices
  • January (following year): First instalment of tax due
  • April (following year): Second instalment of tax due

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6. FAQ

Q1: Do severance payments and long service payments received upon leaving a job need to be reported for tax? A1: Severance payments and long service payments are tax-free. However, payment in lieu of notice and amounts converted from untaken annual leave form part of salary and are taxable.

Q2: Do housing allowances or rent reimbursements provided by the company need to be reported for tax? A2: Yes. Accommodation benefits provided by the company are assessed at their “rental value” (usually 10% of salary) and included in the assessable income.

Q3: Is there a capital gains tax in Hong Kong? A3: No. Profits from buying and selling shares are not subject to tax. However, if you are a professional trader (buying and selling shares as a business), it may be treated as falling within the scope of Profits Tax.

Information in this article is current as of May 2026; tax rates and allowances are subject to the latest announcements by the Inland Revenue Department.