The base for the progressive salaries tax bands.
Net chargeable income
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Net total income
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Deductions applied
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Your breakdown
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The figure the progressive rates actually bite on
Net chargeable income is one of the most important numbers in a Hong Kong salaries tax return, and also one of the most misunderstood. It is what is left after you take your total assessable income, subtract your allowable deductions, and then subtract your personal allowances. The progressive salaries tax rates, which run in successive bands from 2 percent up to a top marginal rate, apply to this figure and nothing else. Get net chargeable income right and the tax almost calculates itself. This tool isolates that step so you can see exactly how income shrinks to the chargeable base.
Two layers: deductions first, then allowances
The order matters because two different concepts are stacked. Deductions come off first, things like your mandatory MPF contributions, approved charitable donations, home loan interest or self-education expenses. They take you from total income down to net total income. Then your allowances come off, the basic personal allowance plus any married, child, dependent parent or other allowances you qualify for, and that takes you down to net chargeable income. The calculator caps the MPF portion at the $18,000 deduction limit it applies, so an over-large MPF figure will not inflate the deduction. Treat that cap and the allowance amounts as the figures modelled here, set in the annual Budget, and confirm them with the Inland Revenue Department.
From $600,000 down to $450,000
Run the default: total income of $600,000, MPF contributions of $18,000, no other deductions, and total allowances of $132,000, which is a single person's basic allowance. The MPF is at the deduction cap, so $18,000 comes off to give net total income of $582,000. Then the $132,000 of allowances comes off, leaving net chargeable income of $450,000. That $450,000 is the figure the 2, 6, 10, 14 and top-rate bands would then be applied to, not the original $600,000.
Net chargeable is not the only base in the system
Here is the subtlety that trips people up. Hong Kong charges the lower of two calculations. One is the progressive rates on net chargeable income, the figure this tool produces. The other is the standard rate on net total income, the figure before allowances are deducted. Higher earners can find the standard rate on net total income, which ignores allowances, produces the lower bill, so their allowances effectively stop mattering past a point. That is why net total income is shown alongside net chargeable income here: both feed the real comparison. A practical tip: if your allowances are large relative to your income, the progressive method usually wins and net chargeable income is the number that counts. As an aside, this whole computation concerns salary; Hong Kong does not tax dividends or most investment gains, so those do not enter the figure at all.
One refinement to keep in mind is the order in which a married couple should think about this. If you elect joint assessment, the incomes and allowances are pooled before the chargeable figure is struck, which can change which spouse's deductions do the most work. The calculator handles a single set of figures, so for a couple it is worth running each spouse alone and then the combined position to see which produces the lower total. The point of the tool is to make the chargeable base visible so that comparison is quick rather than guesswork.
Why is my net chargeable income zero but I still see a tax bill elsewhere?
If allowances wipe out your chargeable income, the progressive tax is nil, but a separate property or profits tax assessment, or the standard-rate comparison, could still apply. This tool only computes the salaries tax base, so a zero here means no progressive salaries tax, not necessarily no tax at all.
Do allowances reduce my income for the standard rate too?
No, and this is the key distinction. Allowances only reduce net chargeable income for the progressive method. The standard rate is charged on net total income, which is after deductions but before allowances, so allowances do not lower the standard-rate base. Confirm the current rates and allowances with the IRD.