2026-27 Hong Kong Budget and Tax Measures

For a typical Hong Kong SME or startup founder, the 2026-27 Budget (delivered February 2026) delivers meaningful structural personal tax relief through higher allowances starting in year of assessment (YA) 2026/27, plus a one-off 100% reduction in salaries tax, tax under personal assessment, and profits tax for YA 2025/26 (capped at HK$3,000). Progressive salaries tax rates, two-tiered standard rates, and two-tiered profits tax rates remain unchanged. Broader measures (AI+, Northern Metropolis acceleration, new industrialisation funding, green initiatives, and talent support) strengthen the longer-term ecosystem for innovation-driven businesses but rarely change a founder’s immediate 2025/26 or 2026/27 tax bill. Highest-leverage actions remain commercial remuneration structuring (salary vs dividend), full claiming of enhanced dependent and child allowances, and optimising Personal Assessment where relevant.

Legislation implementing the one-off relief and allowance increases was passed by the Legislative Council on 13 May 2026 and gazetted on 22 May 2026. IRD applies the changes automatically on final assessment (no separate application needed for the one-off relief or most allowance uplifts).

Salaries Tax for Directors and Entrepreneurs (YA 2026/27)

Progressive rates remain unchanged:

Net Chargeable Personal Income	Progressive Tax Rate %
First HK$50,000	2%
Next HK$50,000	6%
Next HK$50,000	10%
Next HK$50,000	14%
Remainder	17%

Two-tiered standard rate (lower of progressive or standard applies): 15% on the first HK$5 million of net income (after deductions but before personal allowances), 16% on the excess.

One-off relief (applies to YA 2025/26 final tax only): 100% reduction of salaries tax and tax under personal assessment, subject to a ceiling of HK$3,000 per case (per individual for separate assessment; HK$3,000 total for jointly assessed married couples). Applied automatically by IRD. Not available on provisional tax. Benefits ~2.12 million individual taxpayers.

Key structural changes from YA 2026/27 onwards (permanent):

Item	2025/26	2026/27 onwards	Change
Basic Allowance	HK$132,000	HK$145,000	+HK$13,000
Married Person’s Allowance	HK$264,000	HK$290,000	+HK$26,000
Single Parent Allowance	HK$132,000	HK$145,000	+HK$13,000
Child Allowance (each of 1st–9th child)	HK$130,000	HK$140,000	+HK$10,000
Additional Child Allowance (newborn)	HK$130,000	HK$140,000	+HK$10,000
Dependent Parent/Grandparent (aged 60+ or disabled)	HK$50,000	HK$55,000	+HK$5,000
Additional Dependent (resided with taxpayer whole year, aged 60+)	HK$50,000	HK$55,000	+HK$5,000
Dependent Parent/Grandparent (aged 55–59)	HK$25,000	HK$27,500	+HK$2,500
Additional Dependent (resided whole year, aged 55–59)	HK$25,000	HK$27,500	+HK$2,500
Elderly Residential Care Expenses deduction ceiling	HK$100,000	HK$110,000	+HK$10,000

Extended additional child allowance for newborns: From YA 2026/27, taxpayers may claim twice the (new) child allowance –  i.e., HK$280,000 total – for each child in the first two years following childbirth. Applies to children under age 2 at the end of the YA (born on or after 1 April 2025). This implements a 2025 Policy Address fertility measure.

These uplifts benefit ~2.09 million taxpayers (basic/married/single parent), ~360,000 (child-related), and ~830,000 (dependent parent/elderly care), with combined annual revenue cost of roughly HK$5.2–5.5 billion.

Worked Example 1 — HK$600,000 Salary (Single + 2 Dependents Aged 55–59 Living With You) — YA 2026/27

• Income: HK$600,000
• Basic allowance: HK$145,000
• Dependent allowances: 2 × HK$55,000 = HK$110,000
• Total allowances: HK$255,000
• Net chargeable income: HK$345,000

Based on the net chargeable income HK$345,000, we will calculate the tax payable with the formula below

First HK$50k @ 2%	HK$1,000
Next HK$50k @ 6%	HK$3,000
Next HK$50k @ 10%	HK$5,000
Next HK$50k @ 14%	HK$7,000
Remainder HK$145k @ 17%	HK$24,650
Total Tax Payable (By adding up the above)	HK$40,650

 (Compared with 2025/26 levels using the same income and circumstances, the higher allowances reduce net chargeable income and tax by HK$1000.)

Worked Example 2 — Optimised Structure (HK$300,000 Salary + HK$300,000 Dividend) — Same Personal Circumstances, YA 2026/27

• Dividend: Not subject to salaries tax or profits tax in the shareholder’s hands (Hong Kong has no dividend tax).
• Salary: HK$300,000
• Allowances: HK$255,000
• Net chargeable income: HK$45,000
• Tax on salary: HK$900

This remains a common legitimate approach for founders provided the salary is commercially justifiable and the company has sufficient distributable profits. Dividends are not deductible for the company, so the company’s profits tax position must still be managed. IRD can challenge artificial arrangements.

Corporate / Profits Tax

Two-tiered rates remain unchanged for YA 2026/27:

• Corporations: 8.25% on first HK$2 million of assessable profits; 16.5% thereafter.
• Unincorporated businesses: 7.5% on first HK$2 million; 15% thereafter.
• Only one entity in a group of connected entities may enjoy the two-tiered rates.

One-off relief (YA 2025/26 final tax only): 100% reduction of profits tax, capped at HK$3,000 per business. Benefits ~171,000 businesses. Applied automatically.

Example: HK$3 million Assessable Profits (Corporation)

• First HK$2,000,000 × 8.25% = HK$165,000
• Next HK$1,000,000 × 16.5% = HK$165,000
• Tax before reduction: HK$330,000
• One-off reduction (YA 2025/26): HK$3,000
• Tax payable: HK$327,000

Hong Kong continues to tax only Hong Kong-sourced profits. Genuine offshore profits remain non-taxable (subject to facts and the Foreign-sourced Income Exemption / FSIE regime). There is still no capital gains tax and no tax on dividends received.

Other Tax-Related Measures

• Rates concession: First two quarters of 2026/27 — domestic and non-domestic properties, capped at HK$500 per rateable property per quarter.
• Stamp duty (residential property): Ad valorem stamp duty rate for transactions valued above HK$100 million raised from 4.25% to 6.5% (instruments executed on or after 26 February 2026). Affects only ~0.3% of deals; expected to raise ~HK$1 billion annually. Marginal relief applies in a transitional band.
• Relaxation of criteria for stamp duty relief on intra-group transfers and a waiver for transfers of non-residential properties into REITs (subject to conditions and legislative finalisation).

Broader Budget Context for Founders and SMEs

While the tax measures above are the most immediate for personal and corporate cash flow, the 2026-27 Budget emphasises “Driving High-quality, Inclusive Growth with Innovation and Finance” and alignment with China’s 15th Five-Year Plan. Key signals relevant to startups and SMEs include:

• Acceleration of the Hong Kong AI Research and Development Institute (operational in second half of 2026) and a new Committee on AI+ and Industry Development Strategy. Continued AI Subsidy Scheme funding and focus on embodied AI, life & health technology, and microelectronics.
• Northern Metropolis push: dedicated companies for San Tin Technopole and Hung Shui Kiu Industry Park, public-private partnerships, and funding to accelerate land and infrastructure.
• New industrialisation: New Industrialisation Elite Enterprises Nurturing Scheme; ~HK$220 million for Hong Kong’s first national manufacturing innovation centre outside the Mainland; continued New Industrialisation Acceleration Scheme (up to HK$200 million matching support per eligible enterprise for smart production facilities).
• Innovation & Technology Industry-Oriented Fund (HK$10 billion) to channel market capital into strategic emerging fields. Review of tax arrangements for R&D expenditures.
• Support for maritime services tax concessions, half-rate tax concessions for eligible commodity traders, family office/fund regime enhancements, and green measures.
• Talent and skills: Expanded STEAM/AI-related university places, skills upgrading (including AI literacy), and continued attraction of high-calibre talent.

These create medium-term opportunities in AI, advanced manufacturing, green tech, life sciences, and tourism-related services, but they do not alter most founders’ 2025/26 or 2026/27 tax calculations.

Actionable Takeaways for SME/Startup Founders

1. Claim the full enhanced YA 2026/27 allowances (especially dependents living with you and the two-year newborn additional child allowance).
2. Review salary vs dividend mix for commercial substance and overall group tax efficiency.
3. Consider Personal Assessment if you have mixed salaries, business profits, or rental income (the HK$3,000 one-off still applies, with joint-election rules for couples).
4. Factor the one-off HK$3,000 relief into 2025/26 cash-flow planning (it reduces final tax, not provisional).
5. Monitor R&D tax deduction enhancements and sector-specific concessions (maritime, commodities, family offices) if relevant to your business.
6. For property owners or buyers of high-value residential assets, note the stamp duty change and rates concession.

Hong Kong continues to emphasise a simple, low, and competitive tax regime. One-off relief ceilings have fluctuated in recent years; treat the current HK$3,000 figure as non-permanent.

Whether you need help optimising your remuneration structure or setting up a new Hong Kong company, feel free to contact our licensed CPA and Chartered Secretary at info@getstarted.hk.”

FAQs for 2026-27 Budget and Tax Measures

Sources: Official IRD Budget tax measures pages, 2026-27 Budget Speech, Legislative Council materials, and contemporaneous professional summaries (KPMG, PwC, RSM, Deloitte, PKF, etc.). Always verify the latest IRD guidance or seek professional advice for your specific circumstances, as implementation details and any further legislative refinements can apply.