2026-27 Budget – Tax Measures

What tax measures are proposed in the 2026-27 Budget?

In the 2026-27 Budget, the Financial Secretary proposed a one-off reduction of 100% of the final tax for the year of assessment 2025/26 in respect of profits tax, salaries tax and tax under personal assessment, subject to a ceiling of $3,000 per case. Furthermore, the following tax measures will be introduced effective from the year of assessment 2026/27:

(a) Increasing the following allowances:-

Year of assessment		Present (2025/26) $	Proposed (From 2026/27 onwards) $
Basic Allowance		132,000	145,000
Married Person’s Allowance		264,000	290,000
Single Parent Allowance		132,000	145,000
Child Allowance (for each of the 1st to 9th child)		130,000	140,000
Additional Child Allowance (for each child)		130,000	140,000
Dependent Parent / Grandparent Allowance (for each dependant)
	Parent / Grandparent aged 60 or above or is eligible to claim an allowance under the Government’s Disability Allowance Scheme	50,000	55,000
	Parent / Grandparent aged 55 or above but below 60	25,000	27,500
Additional Dependent Parent / Grandparent Allowance (for each dependant who is living with the taxpayer continuously throughout the year)
	Parent / Grandparent aged 60 or above or is eligible to claim an allowance under the Government’s Disability Allowance Scheme	50,000	55,000
	Parent / Grandparent aged 55 or above but below 60	25,000	27,500

(b) Raising the maximum allowable deduction for elderly residential care expenses as follows:-

Year of assessment	Present (2025/26) $	Proposed (From 2026/27 onwards) $
Elderly Residential Care Expenses	100,000	110,000

The Chief Executive proposed in his 2025 Policy Address to extend the claim period of additional child allowance for newborns from one year to two years in order to promote fertility. Starting from the year of assessment 2026/27, a taxpayer may claim twice the allowance (i.e. $280,000, based on the proposed child allowance of $140,000) for each child in the first two years following childbirth. This measure is applicable to all children under the age of two by the end of the year of assessment (i.e. all children born on or after 1 April 2025).

Do I need to apply for the tax reduction proposed in the 2026-27 Budget?

You only need to file your Tax Return - Individuals (BIR60) for the year of assessment 2025/26 as usual. After the enactment of the relevant legislation, IRD will effect the tax reduction in the final assessment for the year of assessment 2025/26 (hereinafter referred to as “2025/26 assessment”) and will also revise those 2025/26 assessments which are issued before the legislative amendment. There is no need for you to make a separate application.

Can I withhold payment of the 2025/26 provisional tax because of the proposed tax reduction measure?

You are required to pay on time the 2025/26 provisional tax. Otherwise, recovery action will be taken by IRD. Similar to previous occasions, the tax reduction is to reduce the 2025/26 final tax that will be charged and not the 2025/26 provisional tax that has already been charged. Therefore, you are still required to pay the 2025/26 provisional tax as charged.

Will the Inland Revenue Department refund the 2025/26 provisional tax already paid by me?

As the tax reduction is to reduce the 2025/26 final tax that will be charged, the reduction will only be reflected in the notices of salaries tax assessment, profits tax assessment and personal assessment to be issued for the year of assessment 2025/26. The tax reduction is not applicable to the 2025/26 provisional tax. The provisional tax paid will be applied to settle the 2025/26 final tax and 2026/27 provisional tax. Excess balance, if any, will be refunded.

How is the tax reduction computed?

You may use the Tax Calculator provided in GovHK to calculate your 2025/26 salaries tax and tax under personal assessment upon the implementation of the proposed tax reduction.

I have to pay salaries tax and profits tax for the year of assessment 2025/26 and I have elected for personal assessment for the year. How should the tax reduction be computed?

Under personal assessment, all income of an individual taxpayer, including salaries income and business profits, will be aggregated to compute the tax payable. Hence, the amount of tax reduction for the year of assessment 2025/26 is 100% of the tax assessed under personal assessment (subject to a ceiling of $3,000) and not the tax payable under salaries tax and profits tax.

A married couple, each with employment income and liable to salaries tax, are separately assessed to tax and they can enjoy a maximum tax reduction of $6,000 in total. If they also have rental income or business profits / loss and are eligible to elect to have their income assessed under personal assessment, what is / are their tax reduction ceiling(s) under personal assessment?

Profits tax, salaries tax and tax under personal assessment for the year of assessment 2025/26 are reduced by 100%, subject to a ceiling of $3,000 per case. Under salaries tax, a married couple are separately assessed. Each of them will get a tax reduction of 100%, subject to a ceiling of $3,000. Under personal assessment, if the taxpayer elects for personal assessment separately from his / her spouse, the married couple will be separately assessed. Each of them will get a reduction of 100% of the tax assessed under their respective personal assessment, subject to a ceiling of $3,000. If the taxpayer elects for personal assessment jointly with his / her spouse, the tax reduction for the couple is 100% of their total tax assessed under personal assessment, capped at $3,000. Whether a taxpayer should apply for personal assessment jointly with his / her spouse will depend on his / her own situation. When considering an election for personal assessment for the year of assessment 2025/26, taxpayers should take into account the factor that the tax reduction for personal assessment jointly elected by a couple will be capped at $3,000. You may use the Tax Calculator provided in GovHK to calculate the tax payable under different scenarios for the year of assessment 2025/26.

I have two businesses in the year of assessment 2025/26, can I get a tax reduction in respect of each business?

For each business, you can get the tax reduction of 100% of the profits tax payable for the year of assessment 2025/26, subject to a ceiling of $3,000.

Does the profits tax reduction proposed in the 2026-27 Budget apply to companies?

The profits tax reduction proposed in the 2026-27 Budget also applies to companies (including corporations and partnership businesses). They will get a one-off reduction of 100% of the final profits tax for the year of assessment 2025/26, subject to a ceiling of $3,000 per case.

10.

I paid elderly residential care expenses of $120,000 in the year of assessment 2025/26, which exceeded the specified maximum of $100,000 for that year of assessment. What amount should I write down in the Tax Return - Individuals (BIR60) for the year of assessment 2025/26 for claiming the elderly residential care expenses deduction?

You should state the actual amount of $120,000 paid in Part 12.4 of your Tax Return - Individuals (BIR60) for the year of assessment 2025/26. After enactment of the relevant legislation, the Assessor will allow the respective maximum deductions at $100,000 and $110,000 when computing your 2025/26 final salaries tax and 2026/27 provisional salaries tax liabilities.

11.

After I had filed my Tax Return - Individuals (BIR60) for the year of assessment 2025/26, the residential care home, in which my 65 years old father stays, informed me that the residential care expenses payable in the year of assessment 2026/27 would be increased from $98,000 to $118,000. What should I do if I want to claim the increased deduction?

If the amount of elderly residential care expenses paid or payable for the year of assessment 2026/27 exceeds $100,000, you may apply in writing for holding over the 2026/27 provisional salaries tax upon receiving the assessment and notice for payment of provisional salaries tax. The application must be lodged not later than:

(a) 28 days before the due date for payment of the provisional tax; or

(b) 14 days after the date of issue of the notice for payment of the provisional tax,

whichever is the later.

In computing the provisional salaries tax payable for the year of assessment 2026/27, the Assessor will not deduct $118,000 as the amount of elderly residential care expenses but will restrict the deduction to $110,000.

12.

I have a child born in the year of assessment 2025/26, can I claim child allowance of $280,000 for that year of assessment?

The Chief Executive’s proposal in his 2025 Policy Address to extend the period of claiming the additional child allowance and the Financial Secretary’s proposal in his 2026-27 Budget to increase the amounts of child allowance and additional child allowance will take effect in the year of assessment 2026/27. Therefore, you can claim child allowance of $130,000 and additional child allowance of $130,000 in the year of assessment 2025/26 under the prevailing Inland Revenue Ordinance. If both proposed tax measures are passed by the Legislative Council, you will be able to claim child allowance of $140,000 and additional child allowance of $140,000 in the year of assessment 2026/27, and claim child allowance of $140,000 in the subsequent years of assessment.