【Tax Guide】How much annual salary do you need to start paying tax? Check out the Hong Kong salaries tax calculation tutorial

We believe everyone has already received the legendary "green bomb" tax return form, and next January will be an important time to pay taxes. But how much annual salary does one need to earn before they have to pay tax? How is Hong Kong's salaries tax calculated? This time, 10Life will explain in detail the calculation method and tax rates for salaries tax, and provide practical tax-saving tips to help everyone handle their tax matters with ease.

Salaries tax is the tax Hong Kong levies on employees' income. Put simply, anyone who works in Hong Kong or receives income from an employment in Hong Kong — such as salary, bonuses, commission, pay in lieu of leave, even the "rental value" of accommodation provided by an employer, or pensions received by retirees — is required to pay salaries tax.

Salaries tax is calculated on the taxable income for the assessment year (1 April to 31 March). Tax can be computed under progressive rates (with deductions and allowances) or at the standard rate (only deductions, no allowances), and the Inland Revenue Department will charge the lower of the two amounts to reduce the taxpayer's burden. The government also provides various deductions and allowances to ensure that only income remaining after the relevant amounts are deducted is subject to tax.

Based on past experience, the Inland Revenue Department generally starts sending out tax returns from the first working day of May each year. If you are filing tax for the first time, because the IRD needs to set up a file for you first, the timing of sending the tax return may not be fixed, but it is usually sent within five months after receiving the following documents:

• The IR56E form completed by the employer;
• or the person's notification to the Commissioner of Inland Revenue that salary tax is payable.

If you submit your tax return late, you may be fined or even prosecuted. So if you have not yet received it, you should proactively contact the IRD to request the tax return and remember to submit it on time. You can also note the following important tax dates:

Many employees probably want to know how much income is required before they must pay tax. Actually, you can refer to the basic personal allowance. According to the Hong Kong Inland Revenue Department, for the 2023/24 year the basic personal allowance is HK$132,000. If your annual income is below this amount, you do not need to pay tax. However, even if your annual salary exceeds the basic personal allowance, you still need to calculate the chargeable income after deducting other applicable allowances — for example the married person's allowance, child allowance, and additional allowance for supporting parents or grandparents — before you can finally determine whether tax is payable.

However, it is worth noting that if a taxpayer was married in the relevant year and has been granted the married person's allowance, they cannot at the same time also claim the basic personal allowance.

Salaries tax in Hong Kong is a tax levied on employees’ income, and the calculation method and rates vary according to income level. For fairness, salaries tax offers two calculation methods: tax is calculated either on the taxpayer’s chargeable income for the year of assessment using progressive rates; or on net income using the standard rate. Generally, the government will collect the lower tax amount. The tax rates and calculation methods are explained in detail below:

How salaries tax is calculated

1. Chargeable income = Total income - Total deductions - Total allowances 
2. Net income = Total income - Total deductions

Salaries tax rates (see the government website for details)

Progressive tax rates

Progressive rates increase with income; when calculating, all allowances and deductions are deducted. The progressive rates for 2023/24 are as follows:

Standard rate

The standard rate for 2023/24 is 15%; when calculating at the standard rate, only deductions are allowed and allowances are not available. According to the 2024/25 Budget, the standard rate will be adjusted as follows:

• Annual income up to HK$5,000,000: 15% (unchanged) 
• Annual income over HK$5,000,000: first HK$5,000,000 at 15%, remainder at 16%

Example calculation of salaries tax

Assume Ms. Cheung is single with an annual salary of HK$800,000, has no additional income, and only claims the basic allowance (HK$132,000). Below are the tax calculations under the two methods:

Calculating chargeable income using progressive rates

1. Total income: HK$800,000 
2. Less MPF contributions (HK$1,500 per month, 12 months): HK$18,000 
   • Net income = HK$800,000 - HK$18,000 = HK$782,000 
3. Less basic allowance: HK$132,000 
   • Chargeable income = HK$782,000 - HK$132,000 = HK$650,000 
4. Tax calculated at progressive rates:  
   • First HK$50,000: 50,000 x 2% = HK$1,000 
   • Next HK$50,000: 50,000 x 6% = HK$3,000 
   • Next HK$50,000: 50,000 x 10% = HK$5,000 
   • Next HK$50,000: 50,000 x 14% = HK$7,000 
   • Remaining HK$450,000: 450,000 x 17% = HK$76,500

Tax payable under progressive rates: HK$92,500

Screenshot from theInland Revenue Department’s salaries tax calculator

Calculating net income using the standard rate

1. Total income: HK$800,000 
2. Less MPF contributions: HK$18,000 
   • Net income = HK$800,000 - HK$18,000 = HK$782,000 

Tax at the standard rate: HK$782,000 x 15% = HK$117,300

Generally, the Inland Revenue Department will choose the lower amount, so Ms. Cheung would pay HK$92,500 in salaries tax. To get a more accurate estimate of your own tax liability, you can use the simple tax calculator provided by the IRD to quickly calculate salaries tax or personal assessment. The above example is for reference only.

Do you need to pay tax in your first year of work?

Even if you are an employee who only works for one year, as long as your annual income exceeds the personal basic allowance (HK$132,000), including salary, bonuses, allowances, etc., you must pay salaries tax.

Do you need to pay tax if you only work as a freelancer or part-timer?

Whether full-time, freelance, or part-time, as long as annual income exceeds HK$132,000, you need to pay tax. Even if you receive salary in cash or by bank transfer, it must be declared truthfully.

What tax-saving methods are there?

As an employee you’ll naturally look for ways to reduce your tax burden, and the Hong Kong government also provides various tax allowances and reliefs; if you are eligible, you can apply for them. In addition, there are eight types of tax deductions — for details, refer to 【2024 Tax Allowances】What are tax allowances? See personal tax allowances and eight deduction methods.

How to pay taxes?

To make it convenient for the public to handle tax matters, the Hong Kong government provides multiple ways to pay taxes, whether online, by bank ATM, mailing a cheque, or paying in person at the Inland Revenue Department, all can be completed easily. Read now 【Tax Payment Methods 2024】Late tax payments can lead to large or small penalties, see the top 10 tax payment methods and important points to note when paying taxes, learn more payment options, choose the method that suits you best, and pay on time.

"The three tax-saving treasures", actually refer to three insurance products that qualify for tax deductions: Qualified Deferred Annuity Plans (QDAP), tax-deductible MPF voluntary contributions (TVC) and the Voluntary Health Insurance Scheme (VHIS). All three can receive tax deductions. The most notable is the Qualified Deferred Annuity Plan (QDAP), which can provide an annual tax deduction of up to 60,000 Hong Kong dollars or more, helping to reduce tax burden and add peace of mind for retirement. SeeHow QDAPs are tax-deducted and Important Notes. Feel free to call or WhatsApp 37051599 to consult 10Life insurance advisors for inquiries.

Further reading:
【2025 Tax-deductible Annuity Complete Guide】Analysis of tax-deductible annuity products (10-year annuity term) — See how annuities save tax and which providers offer higher returns!
【Tax-saving tool】How soon can a tax-deductible annuity break even? How can you maximize tax deductions?
【Tax bill】When is it usually received? What to do if you never receive it? Can you apply for a replacement if the tax bill is lost?
【First-time tax filing tutorial】How to fill out the tax return form? See the step-by-step guide and a handy tutorial pack
【Tax filing 2024】How to apply for online tax filing? The "eTax" account opening: 4 main steps and tax filing tutorial

Last updated: December 24, 2024

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.