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Earlier today on 26 February 2025, the Financial Secretary of the HKSAR released the budget for 2025/2026. Looking back on last year and setting the financial stage for the year ahead, these are our highlights.
Author: Stefan Schmierer, Managing Partner
Hong Kong Budget 2025/2026 – setting the financial stage for the year ahead
On February 26, 2025, Hong Kong's Financial Secretary presented the 2025-26 Budget. As usual, this budget is highly anticipated as Hong Kong continues to face a mix of economic challenges and opportunities.
Overall, the Hong Kong economy shows stable employment and inflation figures and notes two consecutive years of growth.
Growth: The economy grew by 2.5% with a 4.7% increase in total exports of goods.
Labour Market: Unemployment rate remained low at 3.1%.
Inflation: Underlying consumer price inflation was 1.1%.
Nonetheless, there are challenges abound seeing as how hooked into the global economy Hong Kong is. The main challenges mentioned in the budget are geopolitical issues, high interest rates, and reduced land sales; these have impacted trade, supply chains, local markets, and government revenue.
For the third consecutive year, the government notes a deficit in its books.
Deficit: Following deficits of HK$122 billion in 2022/23, and HK$101.6 billion last year, this year the government estimates a hole in the budget of HK$87.2 billion.
What does the Hong Kong SAR government project for the coming year? These are the figures and main initiatives that we would like to mention:
Growth Forecast: Expected to grow by 2-3% in real terms.
Inflation: Forecasted underlying inflation rate is 1.5%.
...revenues are not expected to increase dramatically...
The main message of this budget is that revenues are not expected to increase dramatically in the year ahead and so cost cutting is a priority. Although the government is looking to raise certain taxes and introduce new ones, reducing public spending is the main solution to curb the deficit. A reinforced fiscal consolidation program is run to reduce government recurrent expenditure by 7% over the next 3 years, by 2027-28.
What’s more, for 2025-26, there will be a salary freeze for many levels of public servants, including the executive authorities, the legislature, the judiciary, and members of the District Councils. The government workforce will be cut as well by about 10,000 posts.
On the topic of raising revenue, notable increases in fees are increases of betting fees (0,5% to 1%), air passenger departure tax increase from $120 to $200 and a passenger security charge increase from $55 to $65. Furthermore, the government is looking into legalising basketball betting and thereby raising revenue.
Impacts on the Middle Class:
Tax Reductions: 100% reduction in salaries tax and profits tax for the year of assessment 2024/25, subject to a ceiling of $1,500.
Rates Concession: Rates concession for the first quarter of 2025/26, subject to a ceiling of $500 for each rateable property.
Allowance for Social Security Recipients: An allowance equal to one half of a month of the standard rate CSSA payments, Old Age Allowance, Old Age Living Allowance, or Disability Allowance.
Transport Subsidy: The eligibility threshold for the Public Transport Fare Subsidy Scheme will be raised from HK$400 to HK$500 per month.
Last but not least, the government looks to engage fully with the developments in the AI space and wants to further drive smart manufacturing, and green technology.
Establishment of the Hong Kong AI Research and Development Institute with a $1 billion budget.
Launch of the AI Subsidy Scheme to support local R&D projects.
The Government has set up a Digital Policy Office to support the sustainable development of digital government, economy, and infrastructure. This office will drive data-driven, people-centric, and outcome-based policies.
Green Maritime Fuel Bunkering: The Government will implement the Action Plan on Green Maritime Fuel Bunkering to develop Hong Kong into a green maritime hub3.
All details of the budget and recordings of Mr Chan's presentation to the Legislative Council can be viewed on the dedicated Budget 2025/2026 website.
Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
For specific advice about your situation, please contact:
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