Your effective and marginal rate as a share of income.
Effective tax rate
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Marginal rate
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Tax payable
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Your breakdown
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Effective rate and marginal rate are not the same number
People often quote a single tax rate as if it summed up their whole bill, but two very different figures hide behind that habit. Your effective rate is the share of total income that ends up as tax once everything is averaged out. Your marginal rate is the tax on the very next dollar you earn. In Hong Kong the gap between them is unusually wide, because generous allowances and a gentle starting band pull the average down while the top of the scale stays modest. This tool reports both so you can stop confusing one for the other.
That distinction matters for real decisions. When you weigh a pay rise, overtime, or a side contract, the marginal rate tells you what the taxman takes from those extra dollars. When you compare your overall tax burden against another city or another year, the effective rate is the honest comparison.
The lower-of-two rule behind the figure
Hong Kong salaries tax is calculated twice and you pay the smaller result. The first method runs progressive bands of 2, 6, 10, 14 and 17 percent across successive $50,000 slices of your net chargeable income, which is income after deductions and after allowances. The second applies a flat standard rate, modelled here at 15 percent on the first $5 million of net total income and 16 percent above that, with no allowances given. Most salaried people pay the progressive figure, because allowances shrink the chargeable base sharply. Very high earners eventually cross over to the standard rate, which is why it exists as a ceiling. These specific rates and the $5 million threshold are the figures the calculator applies; treat them as its working assumption and confirm the current ones with the Inland Revenue Department.
One thing that genuinely simplifies life here: Hong Kong does not tax capital gains, does not tax dividends, and has no GST or VAT. So your effective salaries tax rate is close to your total tax picture on investment-heavy finances, in a way it never is in countries that tax gains and distributions on top.
$600,000 income, broken down step by step
Consider someone on $600,000 of income, with $18,000 of deductions such as mandatory MPF, and $132,000 of allowances. Deductions come off first to give net total income, then allowances come off to give net chargeable income. The progressive method is run on the chargeable figure and the standard rate on the total, and the lower wins. Here the progressive result of $58,500 is well below the standard-rate figure of $87,300, so progressive applies, and the one-off Budget reduction this tool models trims $3,000 off the top.
So this taxpayer hands over 9.25 percent of income on average, yet the next dollar they earn is taxed at 17 percent, the top progressive band, because their chargeable income already sits above $200,000. The chart contrasts the gentle average with the steeper marginal rate.
Sorting out the rate confusion
Why is my effective rate so much lower than 17 percent?
Because only the slice of chargeable income above $200,000 is taxed at 17 percent, while the first slices are taxed at 2, 6, 10 and 14 percent, and your allowances were stripped out before any rate applied. The blend of zero-rated allowances and low starting bands is what drags the average into single digits for a lot of middle earners. The headline rate you read about is almost never the rate you actually pay overall.
At what income does the standard rate start to beat the progressive method?
It happens once your chargeable income is large enough that 17 percent on most of it exceeds 15 percent on your full net total income with no allowances. That crossover sits well into seven-figure income for a single person with only the basic allowance, and it moves depending on how many allowances and deductions you have. The tool checks both every time, so you never have to guess which side you are on.
Does investment income change my effective rate?
Generally not, because Hong Kong does not tax capital gains or dividends, and bank interest from local sources is typically outside salaries tax. Salaries tax is built around employment income, so a portfolio that throws off gains and dividends does not push your salaries tax rate up the way it would in a country that taxes that income. Trading carried on as a business can be a different matter and is taxed as profits, so check with the IRD if you trade actively.