Understanding Hong Kong’s Personal Allowances: What Every Business Owner Should Know
📋 Key Facts at a Glance
- Basic Personal Allowance (2024/25): HK$132,000 for all individual taxpayers.
- Married Person’s Allowance (2024/25): HK$264,000, but only one spouse can claim it.
- Child Allowance (2024/25): HK$130,000 per child, with an additional HK$130,000 in the year of birth.
- MPF Deduction Cap: Maximum of HK$18,000 per year for mandatory and qualifying voluntary contributions.
- Tax Year: Runs from April 1 to March 31. Individual tax returns are typically issued in early May.
As a Hong Kong business owner, your personal financial health is directly tied to your company’s success. But are you leaving money on the table by not fully leveraging the personal allowances designed to reduce your tax bill? Beyond smart business deductions, Hong Kong’s Salaries Tax system offers a suite of personal allowances that can significantly lower your taxable income. This guide cuts through the complexity, providing you with the verified facts and actionable strategies to ensure you claim every dollar you’re entitled to for the 2024/25 assessment year and beyond.
The Foundation: Basic and Married Person’s Allowances
Your journey to tax efficiency starts with the core personal allowances. These are fixed amounts deducted from your total assessable income (which includes business profits if you elect for Personal Assessment) before tax is calculated. Understanding the choice between the Basic and Married Person’s Allowance is your first critical decision.
| Allowance Type | Amount (HK$) 2024/25 | Key Condition |
|---|---|---|
| Basic Person’s Allowance | 132,000 | Available to every individual taxpayer. |
| Married Person’s Allowance | 264,000 | Only one spouse can claim it. The other must not claim any personal allowance or be taxed at the standard rate. |
A married couple, one with a business profit of HK$500,000 and the other with a salary of HK$300,000.
- Separate Assessment: Each claims the Basic Allowance (HK$132,000). Total allowance used: HK$264,000.
- Joint Assessment: They combine income (HK$800,000) and claim the Married Person’s Allowance (HK$264,000). This is the same total allowance, but pooling income can be more beneficial under progressive tax rates if one spouse earns significantly less.
Maximising Relief for Your Family
Hong Kong’s tax system provides substantial relief for family responsibilities. Correctly claiming allowances for children and dependent relatives can lead to thousands of dollars in tax savings. The key is understanding the precise eligibility criteria and maintaining proper records.
Child and Dependent Allowances (2024/25)
| Dependent Type | Allowance (HK$) | Key Eligibility Criteria |
|---|---|---|
| Child (each) | 130,000 | Aged under 18; or aged 18-25 and in full-time education; or mentally/physically disabled. |
| Child (Year of Birth Additional) | 130,000 | Claimable in the year the child is born. |
| Dependent Parent/Grandparent (Aged 60+) | 50,000 | Aged 60 or above, or eligible for government disability allowance. Must be ordinarily resident in HK and maintained by you. |
| Single Parent | 132,000 | In addition to the Basic or Married Person’s Allowance, if you have a child you maintain and are not married or living with a spouse. |
Strategic Deductions: MPF and Beyond
Your Mandatory Provident Fund (MPF) contributions are not just for retirement—they’re a powerful tax deduction tool. Furthermore, several other deductions can reduce your assessable income, putting more money back in your pocket.
Key Tax Deductions for Business Owners
| Deduction Type | Maximum (HK$) 2024/25 | Notes |
|---|---|---|
| MPF Mandatory Contributions | 18,000 | Combined cap for mandatory and Tax Deductible Voluntary Contributions (TDVCs). |
| Qualifying Annuity & Voluntary MPF | 60,000 | Separate allowance for qualifying annuity premiums and voluntary MPF contributions. |
| Home Loan Interest | 100,000 | Deductible for a maximum of 20 tax years. |
| Domestic Rent | 100,000 | Cannot claim if you are claiming Home Loan Interest. |
| Self-Education Expenses | 100,000 | For courses leading to a degree or professional qualification. |
| Charitable Donations | 35% of income | Donations to approved charitable institutions. |
Critical Compliance: Avoiding Common Pitfalls
Claiming allowances correctly is as important as claiming them at all. Missteps can lead to disallowed claims, penalties, or audits. Here’s how to stay compliant.
Business Expenses vs. Personal Allowances
This is a fundamental distinction. Business expenses (e.g., office rent, staff salaries, marketing costs) are deducted from your business’s gross income to calculate its profits. Personal allowances are deducted from your total assessable income (which may include those business profits) to calculate your chargeable income for Salaries Tax. Never try to claim personal living expenses as business deductions.
Managing Provisional Tax
Provisional tax is an advance payment based on the previous year’s income. It is payable in two installments, usually in January and April, as specified on your tax demand note. The interest rate on held-over tax is 8.25% (effective July 2025).
✅ Key Takeaways
- Maximise Family Allowances: Ensure you claim the full HK$130,000 per child and HK$50,000 for each eligible dependent parent aged 60+.
- Choose Joint Assessment: Married business owners should almost always elect for joint assessment to utilise the HK$264,000 Married Person’s Allowance.
- Top Up Your MPF: Use Tax Deductible Voluntary Contributions (TDVCs) before March 31 to reach the HK$18,000 deduction limit.
- Keep Impeccable Records: Maintain proof of dependency, MPF statements, and donation receipts for at least 7 years.
- Plan for Provisional Tax: Budget for these payments and apply for a holdover if your current-year income justifies it.
Mastering Hong Kong’s personal allowances transforms them from a bureaucratic formality into a strategic financial tool. By systematically claiming what you are entitled to, you directly increase your post-tax income, providing more capital to reinvest in your business, save, or spend as you choose. Start your 2024/25 tax planning now—review your family’s circumstances, organise your documents, and consider consulting a tax professional to build a robust, compliant strategy.
📚 Sources & References
This article has been fact-checked against official Hong Kong government sources:
- Inland Revenue Department (IRD) – Official tax authority
- IRD Salaries Tax Guide – Detailed rules on allowances and deductions
- GovHK – Hong Kong Government portal
- Hong Kong Budget 2024-25 – For latest fiscal measures
Last verified: December 2024 | This article is for informational purposes only and does not constitute professional tax advice. Tax laws are complex and subject to change. For advice tailored to your specific situation, consult a qualified tax practitioner.