Salaries tax, in practice

Hong Kong salaries tax is worked out on a year of assessment. The notes below cover how the tax is calculated, the allowances and the rates for the 2026/27 year of assessment, the deductions people commonly claim, when the tax return is issued and the time allowed for filing it, provisional salaries tax, and the employer's duty to report when you start, when the employment ends, and when you leave Hong Kong. They follow Inland Revenue Department (IRD) A guide to salaries tax (1) (PAM 39), the table of allowances, deductions and tax rates (PAM 61, August 2026 edition), the frequently asked questions on the tax measures in the 2026-27 Budget, the IRD pages on an employer's obligations and on tax returns, and the GovHK page on tax rates. Checked 18 October 2026.

The year of assessment

A year of assessment runs from 1 April to 31 March of the following year. The 2026/27 year of assessment covers 1 April 2026 to 31 March 2027.

How the tax is worked out

1. Net income = assessable income minus allowable deductions.
2. Net chargeable income = net income minus allowances.
3. Work out the tax on net chargeable income at the progressive rates, and the tax on net income (before deducting allowances) at the standard rate. The lower figure is the one charged.
4. Then subtract the tax reduction for that year, if there is one.

Progressive rates (from 2020/21 until replaced)

1. On the first HK$50,000: 2%.
2. On the next HK$50,000: 6%.
3. On the next HK$50,000: 10%.
4. On the next HK$50,000: 14%.
5. On the remainder: 17%.

The tax on the first HK$200,000 of net chargeable income comes to HK$16,000 in total.

Standard rate (from 2024/25)

There is a two-tier standard rate. The first HK$5,000,000 of net income is charged at 15%, and the remainder at 16%. GovHK states that, in 2026/27, a single person starts to approach the standard-rate zone at an annual income of about HK$2,132,500.

Main allowances for 2026/27

1. Basic allowance: HK$145,000 (HK$132,000 for 2025/26).
2. Married person's allowance: HK$290,000.
3. Child allowance: HK$140,000 for each child. From 2026/27, an additional claim may be made in each of the first 2 years after the child is born, so the total for each of those years is HK$280,000.
4. Dependent parent or dependent grandparent allowance: HK$55,000 for each person aged 60 or above (or eligible to claim Disability Allowance). HK$27,500 for each person aged 55 to 59. If that person lives with you continuously throughout the year, you may claim a further allowance of the same amount.
5. Single parent allowance: HK$145,000.

The Legislative Council passed these adjustments on 13 May 2026. They were gazetted on 22 May 2026.

Deductions often claimed (ceilings for 2026/27)

1. Mandatory MPF contributions: HK$18,000.
2. Self-education expenses: HK$100,000.
3. Domestic rent: a basic ceiling of HK$100,000, plus a further deduction ceiling of HK$20,000. You must meet the conditions set by the IRD.
4. Qualifying premiums under a Voluntary Health Insurance Scheme policy: HK$8,000 for each insured person.
5. Qualifying annuity premiums and tax-deductible voluntary MPF contributions: HK$60,000 in total.
6. Approved charitable donations: not more than 35% of income after deduction of expenses.

Each deduction has its own conditions. Keep the receipts, in case the IRD checks the claim.

A worked example (IRD PAM 39)

The facts: employment from 1 October 2025, monthly salary HK$40,000, monthly MPF contribution HK$1,500.

For 2025/26:

1. Income: 40,000 × 6 = 240,000.
2. Less MPF contributions: 1,500 × 6 = 9,000. Net income is 231,000.
3. Less the basic allowance of 132,000. Net chargeable income is 99,000.
4. Tax at the progressive rates: the first 50,000 × 2% = 1,000; the remaining 49,000 × 6% = 2,940; total 3,940.
5. Tax at the standard rate: 231,000 × 15% = 34,650. The lower figure, 3,940, is used.
6. Less the 100% tax reduction for 2025/26 (capped at 3,000). Tax payable is 940.

Provisional salaries tax for 2026/27 (the previous year's income restated as 12 months):

1. Income: 40,000 × 12 = 480,000. Less MPF of 18,000. Net income is 462,000.
2. Less the basic allowance of 145,000. Net chargeable income is 317,000.
3. Tax at the progressive rates: the first 200,000 is 16,000; the remaining 117,000 × 17% = 19,890; total 35,890.
4. Tax at the standard rate: 462,000 × 15% = 69,300. The lower figure, 35,890, is used.

The demand note in this example totals HK$36,830. It is generally paid in 2 instalments. The first, around January 2027, is HK$27,857 (940 + 35,890 × 75%). The second, around April 2027, is HK$8,973 (35,890 × 25%).

Provisional salaries tax

1. Provisional salaries tax is generally worked out on the previous year's income, after allowances.
2. The IRD states that provisional tax is not a prepayment of tax, and that it is not tax on future income. When the first instalment falls due, you have already earned about 9 months of income. When the second instalment falls due, you have already earned 12 months of income.
3. If this is your first year working in Hong Kong, the first demand note usually includes both the previous year's salaries tax and the current year's provisional tax. The sum can be much higher than you expected. Set the money aside in advance.
4. If you expect your income for the current year to fall substantially, you may apply to hold over the provisional tax, on the grounds and within the time the IRD specifies.

The tax return

1. The individual tax return (BIR60) is generally issued on the first working day of May each year.
2. If you have no sole-proprietorship business, you must file within 1 month from the date of issue. If you have a sole-proprietorship business, the time allowed is 3 months.
3. If you receive a tax return, you must complete it and file it on time even if you have no income to report.
4. GovHK states that a person who was previously assessed as having no tax to pay may not receive a BIR60 every year. Once you become chargeable to tax, you must notify the IRD in writing not later than 4 months after the end of the basis period for the year of assessment in question.
5. You can file online through eTAX.

What the employer must report

1. A new employment: if the employer expects you to be liable to salaries tax, the employer must file an IR56E within 3 months of employing you, and must give you a copy.
2. The employment ends: the employer must file an IR56F 1 month before the employment ends.
3. You will leave Hong Kong for more than 1 month: the employer must file 2 copies of IR56G 1 month before the expected date of departure. From the date of filing, the employer must withhold every sum payable to you (including salary, commission, bonus, rent, reimbursement of expenses, and similar payments) until you have completed tax clearance and produced a letter of release issued by the IRD, or until 1 month has passed from the date of filing, whichever is earlier.
4. In early April each year, after the employer receives the employer's return, the employer files an IR56B for employees who were in employment on 31 March.

Tax clearance before you leave Hong Kong

1. If you are leaving Hong Kong after the employment ends, tell the employer your expected date of departure in advance, so that the employer can file IR56G on time.
2. Complete and file the tax return the IRD issues, and pay the tax, as soon as you can. The employer will release the money withheld only after you have the IRD's letter of release.
3. Allow time. IR56G must be filed 1 month before you leave, so settle the departure plan as early as you can.

Common mistakes

1. Thinking the first year is not taxed. Income in the first year is taxed as well, and in the second year a provisional tax charge arrives too.
2. Thinking the highest rate is 15%. The top band of the progressive rates is 17%. The standard rate is a separate calculation. The lower of the two results is the one used.
3. Missing a deduction. Mandatory MPF contributions, self-education expenses, domestic rent, and other deductions have to be claimed on the tax return.
4. Keeping no receipts. You must keep evidence for any deduction you claim.

Sources

• Inland Revenue Department, A guide to salaries tax (1), PAM 39(e)
• Inland Revenue Department, Salaries tax and personal assessment: allowances, deductions and tax rate table, PAM 61(e) (August 2026 edition)
• Inland Revenue Department, Frequently asked questions on the tax measures in the 2026-27 Budget (checked 18 October 2026)
• Inland Revenue Department, Completing and filing the individual tax return (BIR60), page (checked 18 October 2026)
• Inland Revenue Department, Tax obligations of an employer, page (checked 18 October 2026)
• Inland Revenue Department, You or your employee are about to leave Hong Kong, PAM 46(e)
• GovHK, Salaries tax and personal assessment tax rates, and Types of tax return (checked 18 October 2026)