Salaries Tax Allowances and Deductions: A Plain Guide for HK Employees

Understanding Hong Kong salaries tax goes a long way. Most employees file a Tax Return – Individuals (BIR60) each year and claim allowances and deductions to lower the portion of income that is actually taxed. This guide walks through the main allowances, the deductions employees commonly claim, and how the claim mechanics work in practice.

How salaries tax is computed in concept

Salaries tax is charged on income from employment, office, or pension. The Inland Revenue Department (IRD) first calculates Net Assessable Income by subtracting allowable deductions from your gross assessable income. It then applies either:

• The progressive tax rates on net chargeable income (income after allowances and deductions are taken), or
• The standard rate on net income,

and the lower of the two amounts is taken.

The progressive rates are 2%, 6%, 10%, 14% and 17% on bands of net chargeable income. The standard rate is 15%, and a higher standard rate of 16% applies to the portion of net income above HK$5,000,000 for the year of assessment 2024/25 and onwards.

Knowing this flow helps when you ask whether a particular item is an *allowance* or a *deduction* — both reduce the income the rates are ultimately applied to, through different stages of the computation.

The main allowances in concept

Allowances are personal reliefs that reduce the income the progressive rates are applied to. They are typically claimed automatically in the BIR60, but you should still review them each year.

Common allowances include:

• Basic allowance – available to every individual taxpayer.
• Married person's allowance – for a married couple where one spouse is not earning assessable income, or is electing for joint assessment.
• Child allowance – for each qualifying child, with a higher amount for the year of birth.
• Dependent parent / grandparent allowance – with higher amounts where the dependant lives with you.
• Disabled dependant allowance – for a dependant who meets the statutory disability criteria.
• Personal disability allowance – for the taxpayer themselves if they meet the statutory criteria.
• Single parent allowance – for a sole surviving parent / single parent who is the sole carer for a qualifying child.
• Charitable donations – handled under deductions below.

Two notes worth keeping in mind:

1. Allowances are generally not transferrable, except in specific situations such as joint assessment of a married couple, where unused allowances can be allocated between spouses.
2. The IRD pre-fills many of these from your BIR60. Review them carefully rather than assuming the result figures are final.

Deductible outgoings you can claim

Deductions reduce your assessable income before tax rates are applied. The most common categories for employees are summarised below.

Self-education expenses

You can deduct fees paid for an approved course, training, or developmental programme that maintains or upgrades skills required for your current employment, or that qualifies you for a new trade or profession.

Typical qualifying items include:

• Tuition fees and course fees for approved providers
• Examination fees
• Course-related materials where these form part of the fee structure

Items that are usually not deductible include costs reimbursed by your employer, fees paid by a third party, or courses taken for general personal interest unrelated to work.

Home-loan interest

If you are the legal owner of a residential property in Hong Kong and the property is used as your place of residence, you can deduct mortgage interest on a loan used to finance the property. The deduction is subject to:

• A ceiling on the loan amount and a maximum deduction period of 20 assessment years
• A reduction where your spouse or another person co-owns the property or co-borrows the loan
• Conditions around the property being your residence, and that the loan is secured by a mortgage or charge on the property

Mandatory Provident Fund (MPF) and Tax Deductible Voluntary Contributions (TVC)

MPF contributions you and your employer make are typically handled outside the salaries tax computation. However, Tax Deductible Voluntary Contributions (TVC) to a scheme you make on your own behalf can be claimed as a deduction. The TVC cap is HK$60,000 per year, aggregated with any qualifying deferred annuity premiums (QDAP) deduction claimed in the same year of assessment.

A few practical points:

• TVC must be paid into an MPF scheme that accepts TVC; the scheme provider reports contributions to the IRD.
• Special voluntary contributions under an employer-sponsored scheme are generally not eligible for the TVC deduction.
• You cannot double-count TVC with any other MPF-related relief.

Approved charitable donations

Donations to approved charitable institutions or trusts of a public character are deductible, subject to the statutory cap and conditions applicable to the year of assessment. Keep official receipts because the IRD may request them during review.

Other deductions employees sometimes claim

Depending on your situation, additional deductions may be available, including:

• Elderly residential care expenses for a parent or grandparent
• Mandatory contributions to a recognised retirement scheme beyond MPF where applicable
• Annuity premiums and qualifying deferred annuity premiums (QDAP) under specified conditions, aggregated within the HK$60,000 TVC cap.

Always cross-check whether a particular expense meets the statutory definition before claiming.

Claim mechanics in practice

For most employees, the process works like this:

1. Receive the BIR60 from IRD, typically issued in the first half of the year for the prior year of assessment (1 April to 31 March).
2. Review pre-filled information, including personal details, employer-reported income (from your IR56B), and any pre-claimed allowances and deductions.
3. Complete additional claims by making additions or corrections, attaching the required supporting documentation. Some typical steps require online confirmation rather than using a printed signature page.
4. Submit the return before the deadline stated on the return, unless an extension is granted.
5. Receive a notice of assessment and, if applicable, a demand note for the tax due.

Documentation you may be asked to provide later includes donation receipts, course enrolment confirmations, mortgage statements, and TVC contribution records. Keeping these filed by category makes review straightforward if the IRD queries a claim.

A practical checklist before you submit

• Confirm your name, IRD file number, and personal particulars are correct.
• Check employer-reported income against your payslips and IR56B.
• Decide whether to use married person's allowance, joint assessment, or elect personal assessment where appropriate.
• Verify that deductions are supported by documents and within statutory caps.
• Cross-check your record of donations, self-education expenses, and any home-loan interest against bank statements and receipts.

Salaries tax in Hong Kong is more navigable than it first appears once allowances and deductions are separated in your mind. Run through the BIR60 carefully each year, keep your receipts in one place, and revisit your situation whenever there is a change in employment, marital status, or property.

A simpler way to keep your tax documents organised

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