[Tax 2026] How much tax on an annual salary of HK$1 million? What tax-saving methods are there?

Tax season has arrived again, and when faced with the tax amount shown on the “green bomb”, high earners can only feel helpless. So, how much tax does a person earning an annual salary of HK$1 million need to pay? Does bonus also need to be included as taxable income? Are there any tax exemption methods that can help? This time, 10Life will explain in detail how salaries tax is calculated, and introduce a range of tax exemption methods.

Generally speaking, the Inland Revenue Department starts issuing tax returns between May and June each year. Taxpayers are required to complete and submit them within one month; if electronic tax filing is chosen, an automatic one-month extension is granted. If you do not receive one, you should notify the Inland Revenue Department proactively. After receiving the tax return, the Inland Revenue Department will begin issuing tax bills (notices of assessment) from October onwards. Tax payments are usually made in two instalments: the first in January and the second in April. Please remember to pay your taxes on time to avoid fines or other legal liabilities.

In Hong Kong, salaries tax is mainly calculated in two ways: either on the net chargeable income using progressive rates, or on the net income using the standard rate. The methods and rates are as follows:

1. Net chargeable income (salaries tax calculated using progressive rates)

• Calculation formula: Net chargeable income = Total income - Total deductions - Total allowances 
• Progressive rate table: 
  • First HK$50,000 at 2% 
  • Next HK$50,000 at 6% 
  • Next HK$50,000 at 10% 
  • Next HK$50,000 at 14% 
  • The remaining balance at 17% 

Generally speaking, progressive rates are usually suitable for ordinary employees, as this method allows you to enjoy allowances and deductions, thereby reducing your tax burden.

2. Net income (salaries tax calculated using the standard rate)

• Calculation formula: Net income = Total income - Total deductions 
• Standard rate: 
  • Current rate: 15%. 
  • From the 2024/25 year of assessment onwards: the rate for the portion exceeding HK$5 million will be adjusted to 16%. The first HK$5 million will still be taxed at 15%. 

The standard rate applies to high-income earners. For example, a single person with an annual salary exceeding HK$1 million and no other allowances may need to have their tax calculated using the standard rate.

Based on the above circumstances, single individuals with an annual salary exceeding HK$1 million are generally taxed at the standard rate if they do not enjoy any other allowances. For example, if Mr Chan has an annual salary of HK$1,200,000 and does not enjoy any other allowances or deductions, the tax payable would be as follows: 

Calculate net income: 

• Annual salary: $1,200,000 
• Less MPF contributions ($1,500 x 12): $18,000 
• Net income: $1,200,000 - $18,000 = $1,182,000 

Calculate salaries tax at the standard rate of 15%: 

• Tax payable: $1,182,000 x 15% = $177,300

As the standard rate does not include allowances and only takes deductions into account, high-income earners will usually pay more salaries tax when using this method. Therefore, many people make use of other deductible items, such as “the three tax-saving essentials”, to ease their tax burden. If you would like a more accurate understanding of your actual tax payable, you may make use of the Inland Revenue Department’s Simple Tax Calculator to quickly calculate the amount of salaries tax or personal assessment. The above example is for reference only.

I’m sure everyone will be concerned about whether bonuses need to be taxed. Under Hong Kong tax law, bonuses are included in assessable income and are subject to salaries tax. In fact, whether it is commission, a bonus, wages in lieu of annual leave, end-of-contract gratuities, or even payment in lieu of notice, any income paid by an employer is taxable income. Whether paid before commencement of employment, during employment, or after termination, or even if the employer voluntarily overpays, it must still be included in the taxable scope and reported. When submitting your tax return, remember to check carefully and accurately declare all work-related income, so as to avoid omissions or unnecessary trouble.

When your salary is high, your tax bill is naturally high too, and paying tax can feel painful. In fact, the various allowances and tax deductions provided by the Government can help taxpayers ease their tax burden. Under Hong Kong tax law, taxpayers who meet the eligibility criteria may apply for different allowances, while deductions such as MPF mandatory contributions, Voluntary Health Insurance, and even approved charitable donations can all help reduce the tax payable. Want to know more ways to save on tax? Read “[2026 Tax Allowance] What is a tax allowance? Learn about personal allowances and 8 deduction methods” to get a full grasp of all allowances and tax deductions and handle tax matters with ease.

Can married couples save tax by filing jointly?

When choosing to file jointly, the Inland Revenue Department will combine the couple’s incomes and deduct the married person’s allowance and other tax deductions, which may help you save tax. However, whether this actually results in greater tax savings depends on factors such as the income distribution between both parties, deductible items and the number of children. It is recommended that you make good use of the Simple Tax Calculator provided by the Inland Revenue Department to work out the most suitable tax-saving method. Whether you choose joint or separate assessment, both spouses will need to complete their own tax returns. If you choose to file jointly, you must also submit an application to the Inland Revenue Department at the same time. The Inland Revenue Department will automatically calculate and compare the options to determine the filing method that is most beneficial to you.

Can same-sex couples file jointly?

According to Hong Kong’s Inland Revenue Ordinance, whether the marriage is between opposite-sex or same-sex partners, all married persons may, together with their spouse, choose joint assessment or personal assessment. At the same time, they may also apply for allowances or tax deductions for their spouse, helping to reduce their tax burden.

Is mortgage repayment tax-deductible?

To help property owners with mortgage repayments ease the pressure, the Hong Kong Government has introduced the “mortgage tax deduction”, also known as the “home loan interest deduction”. Eligible owners can claim a tax deduction for mortgage interest on their principal residence, up to HK$100,000 per year. The deduction can be claimed for up to 20 years of assessment, and you may choose whichever year suits you best without needing to use it consecutively, making it highly flexible.

If I only rent, can I get a tax exemption?

If you only rent, you may still benefit from the “rental expense deduction” tax concession. This policy has been in effect since April 2022. Eligible individuals can deduct up to HK$100,000 of rental expenses per year of assessment, with no time limit. If your monthly rent is around HK$8,000, your annual rental expenses would already use up the full tax concession. Tenants should remember to claim the rental deduction when filing their tax returns to help save tax.

“The Three Tax Deduction Essentials” — namely the Qualified Deferred Annuity Policy (QDAP, tax-deductible annuity), Tax-deductible Voluntary Contributions (TVC) to MPF, and the Voluntary Health Insurance Scheme (VHIS) — are all eligible for tax deductions. Together, these three items can provide taxpayers with tax deductions of up to HK$68,000 or more per year. Among them, the Qualified Deferred Annuity Policy (QDAP) not only offers a tax deduction of up to HK$60,000 per year, but also helps accumulate wealth, giving you greater security in retirement. If you would like to learn more about tips for choosing tax-deductible annuities and points to note, feel free to call or WhatsApp 37051599 to enquire with 10Life Insurance Consultant.

Further reading: 
【2026 Tax-deductible Annuities Guide】Analysis of annuity tax-deductible products (10-year annuity term) — find out how annuities help you save tax and which provider offers the highest returns!
【Tax-saving essential】How soon can tax-deductible annuities break even? How can you maximise your tax deductions?
【Tax payment methods 2026】Late tax payment can cost more or less — discover 10 tax payment methods and tax payment tips
【Tax return 2026】How do I apply for online tax filing? Four steps to open an “eTAX” account and a tax filing guide
What is provisional tax / prepayment of tax? How do I pay deferred provisional tax? Who can apply to defer payment of provisional tax?

Last updated on: 1 January 2025

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.