v3.25.4
Tax
 12 Months Ended
Dec. 31, 2025
Income Taxes [Abstract]  
Tax
7
Tax
Tax expense
2025
2024
2023
$m
$m
$m
Current tax1
6,978
6,115
5,718
–  for this year
6,606
5,863
5,737
–  adjustments in respect of prior periods3
324
31
(19)
–  Pillar 2 and qualifying domestic top-up taxes
48
221
—
Deferred tax
(202)
1,195
71
–  origination and reversal of temporary differences
173
1,288
19
–  effect of changes in tax rates
35
(2)
17
–  adjustments in respect of prior periods3
(410)
(91)
35
Year ended 31 Dec2
6,776
7,310
5,789
1Current tax included Hong Kong profits tax of $2,351m (2024: $1,615m; 2023: $1,328m). The Hong Kong tax rate applying to the profits of subsidiaries
assessable in Hong Kong was 16.5% (2024: 16.5%; 2023: 16.5%).
2In addition to amounts recorded in the income statement, a tax charge of $136m (2024: credit of $12m) was recorded directly to equity.
3Adjustments in respect of prior periods includes deferred tax credits in Hong Kong arising on temporary differences between IFRS and the regulatory basis of
accounting on which the tax returns are prepared, and in the UK on tax losses, both of which arise from the finalisation of 2024 tax returns and are offset by
corresponding charges in current tax.
Tax reconciliation
The tax charged to the income statement differs from the tax charge that would apply if all profits had been taxed at the UK corporation tax rate as
follows:
2025
2024
2023
$m
%
$m
%
$m
%
Profit before tax
29,907
32,309
30,348
Tax expense
Taxation at UK corporation tax rate of 25.0% (2024: 25.0%, 2023: 23.5%)
7,477
25.0
8,077
25.0
7,132
23.5
Impact of differently taxed overseas profits in overseas locations
(1,316)
(4.4)
(1,351)
(4.2)
(612)
(2.0)
UK banking surcharge
179
0.6
215
0.7
350
1.2
Items increasing tax charge in 2025:
–  local taxes and overseas withholding taxes
692
2.3
584
1.8
419
1.4
–  movements in unrecognised deferred tax
314
1.0
259
0.7
(22)
(0.1)
–  fines and provisions for legal settlements
294
1.0
—
—
—
—
–  impairment of investment in BoCom
250
0.8
—
—
705
2.3
–  other permanent disallowables
237
0.8
344
1.0
227
0.7
–  dilution loss on the Group’s investment in BoCom
128
0.4
—
—
—
—
–  movements in provisions for uncertain tax positions
118
0.4
38
0.1
(472)
(1.6)
–  impact of business disposals
100
0.3
—
—
—
—
–  non-deductible bank levy expense
75
0.3
73
0.2
112
0.4
–  impact of global and domestic minimum taxes
48
0.2
221
0.7
—
—
–  impact of changes in tax rates
35
0.1
6
—
17
0.1
–  impact of hyperinflation
32
0.1
327
1.0
348
1.1
–  tax impact of sale of HSBC Argentina
—
—
1,536
4.8
—
—
Items reducing tax charge in 2025:
–  non-taxable income and gains
(970)
(3.2)
(1,079)
(3.3)
(1,189)
(3.9)
–  effect of profits in associates and joint ventures
(582)
(1.9)
(456)
(1.4)
(571)
(1.9)
–  deductions for AT1 coupon payments
(249)
(0.8)
(249)
(0.8)
(229)
(0.7)
–  adjustments in respect of prior periods
(86)
(0.3)
(46)
(0.1)
16
0.1
–  non-taxable gain on disposal of HSBC Canada
—
—
(1,174)
(3.6)
—
—
–  impact of sale of French retail banking business
—
—
(15)
—
—
—
–  accounting gain on acquisition of SVB UK
—
—
—
—
(442)
(1.5)
Year ended 31 Dec
6,776
22.7
7,310
22.6
5,789
19.1
The Group’s profits are taxed at different rates depending on the country or territory in which the profits arise. The key applicable tax rates for 2025
include Hong Kong (16.5%), the US (21.0%) and the UK (25.0%). If the Group’s profits were taxed at the statutory rates of the countries in which
the profits arose, then the tax rate for the year would have been 21.2% (2024: 21.4%).
The effective tax rate for the year of 22.7% was higher than in the previous year (2024: 22.6%). The effective tax rate for the year was increased
by 1.2% by the dilution loss and non-deductible impairment of the Group’s investment in BoCom, increased by 1.0% by movements in
unrecognised deferred tax, primarily relating to French tax losses, and increased by 1.0% by the impact of fines and provisions for legal
settlements on which no tax benefit is recorded. The effective tax rate for the year was reduced by 0.3% by adjustments in respect of prior
periods, mainly arising from the finalisation of prior year tax returns in India and Hong Kong. The effective tax rate for 2024 was reduced by 3.6%
by the non-taxable gain arising on the disposal of HSBC Canada, increased by 4.8% by the non-deductible loss arising on the disposal of HSBC
Argentina, increased by 0.7% by movements in unrecognised deferred tax, primarily relating to French tax losses, and increased by 0.7% by the
Group’s Pillar 2 global minimum tax charge.
The UK adopted the ‘Pillar Two’ global minimum tax model rules of the OECD’s Inclusive Framework on Base Erosion and Profit-Shifting (‘BEPS’)
with effect from 1 January 2024. Many jurisdictions adopted similar rules, as well as domestic minimum tax regimes, from 1 January 2025 and
some jurisdictions, such as Bermuda, introduced new or amended corporate income tax regimes effective from that date. These changes have the
effect of increasing local overseas tax liabilities in 2025 and reducing the UK top-up tax liability.
Accounting for taxes involves some estimation because tax law is uncertain and its application requires a degree of judgement, which authorities
may dispute. Liabilities are recognised based on best estimates of the probable outcome, taking into account external advice where appropriate.
Exposures to additional tax liabilities arising from uncertain tax positions were reassessed during 2025, resulting in a charge of $118m to the
income statement. We do not expect significant liabilities to arise in excess of the amounts provided. HSBC only recognises current and deferred
tax assets where recovery is probable.
Movement of deferred tax assets and liabilities
Loan
impairment
provisions
Unused tax
losses and
tax credits
Financial
assets at
FVOCI
Cash flow
hedges
Retirement
obligations
Other
Total
$m
$m
$m
$m
$m
$m
$m
Assets
1,070
3,864
616
442
—
2,906
8,898
Liabilities
—
—
—
—
(1,767)
(1,607)
(3,374)
At 1 Jan 2025
1,070
3,864
616
442
(1,767)
1,299
5,524
Income statement
11
(466)
226
10
(96)
517
202
Other comprehensive income
—
—
(564)
(587)
6
161
(984)
Foreign exchange and other adjustments
(25)
74
221
23
(100)
200
393
At 31 Dec 2025
1,056
3,472
499
(112)
(1,957)
2,177
5,135
Assets1
1,056
3,472
499
—
—
3,503
8,530
Liabilities1
—
—
—
(112)
(1,957)
(1,326)
(3,395)
Assets
1,158
4,544
876
419
—
2,933
9,930
Liabilities
—
—
—
—
(1,814)
(1,600)
(3,414)
At 1 Jan 2024
1,158
4,544
876
419
(1,814)
1,333
6,516
Income statement
(74)
(640)
100
—
(85)
(431)
(1,130)
Other comprehensive income
—
—
(49)
84
114
189
338
Foreign exchange and other adjustments
(14)
(40)
(311)
(61)
18
208
(200)
At 31 Dec 2024
1,070
3,864
616
442
(1,767)
1,299
5,524
Assets1
1,070
3,864
616
442
—
2,906
8,898
Liabilities1
—
—
—
—
(1,767)
(1,607)
(3,374)
1After netting off balances within countries, the balances as disclosed in the accounts are as follows: deferred tax assets of $7,235m (2024: $6,841m) and
deferred tax liabilities of $2,100m (2024: $1,317m).
In applying judgement in recognising deferred tax assets, management has assessed all relevant information, including future business profit
projections and the track record of meeting forecasts. Management’s assessment of the likely availability of future taxable profits against which to
recover deferred tax assets is based on the most recent financial forecasts approved by management, which cover a five-year period and are
extrapolated where necessary, and takes into consideration the reversal of existing taxable temporary differences and past business performance.
When forecasts are extrapolated beyond five years, a number of different scenarios are considered, reflecting different downward risk
adjustments, in order to assess the sensitivity of our recognition and measurement conclusions in the context of such longer-term forecasts.
The Group’s net deferred tax asset of $5.1bn (2024: $5.5bn) included $1.5bn (2024: $2.6bn) of deferred tax assets relating to the UK, $2.8bn
(2024: $3.0bn) of deferred tax assets relating to the US and a net deferred asset of $0.8bn (2024: $0.5bn) in France.
The UK deferred tax asset of $1.5bn excluded a $2.0bn deferred tax liability arising on the UK pension scheme surplus, the reversal of which is not
taken into account when estimating future taxable profit due to the level of uncertainty as to the timing and manner of its reversal. The UK
deferred tax assets are supported by forecasts of taxable profit, also taking into consideration the history of profitability in the relevant businesses.
The majority of the deferred tax asset relates to tax attributes which do not expire and are forecast to be recovered within two years and as such
are less sensitive to changes in long-term profit forecasts.
The net US deferred tax asset of $2.8bn included $1.0bn related to US tax losses, of which $0.7bn expire in 9 to 12 years. Management expects
the US deferred tax asset to be substantially recovered within 13 years, with the majority recovered in the first five years.
The net deferred tax asset in France of $0.8bn included $0.7bn related to tax losses, which are expected to be substantially recovered within 10
years. An additional $0.1bn of deferred tax asset relating to French tax losses was recognised during the year, supported by the business’s
improved performance and outlook. Unused tax losses with a tax value of $0.3bn have not been recognised due to the absence of convincing
evidence regarding the availability of sufficient future taxable profits against which to recover them.
Unrecognised deferred tax
The amount of gross temporary differences, unused tax losses and tax credits for which no deferred tax asset is recognised in the balance sheet
was $13.8bn (2024: $11.0bn). This amount included unused US state tax losses of $3.8bn (2024: $3.8bn) which are forecast to expire before they
are recovered, unused French tax losses of $1.4bn (2024: $0.7bn) for which there is insufficient evidence of future taxable profits to support
recognition, and unused UK tax losses of $3.4bn (2024: $3.5bn), which arose prior to 1 April 2017 and can only be recovered against future taxable
profits of HSBC Holdings. No deferred tax was recognised on these losses due to the absence of convincing evidence regarding the availability of
sufficient future taxable profits against which to recover them. Deferred tax asset recognition is reassessed at each balance sheet date based on
the available evidence. Of the total amounts on which deferred tax was not recognised, $7.6bn (2024: $6.0bn) had no expiry date, $1.3bn (2024:
$1.0bn) was scheduled to expire within 10 years and the remaining balance is expected to expire after 10 years.
Deferred tax is not recognised in respect of the Group’s investments in subsidiaries and branches where HSBC is able to control the timing of
remittance or other realisation and where remittance or realisation is not probable in the foreseeable future. The aggregate temporary differences
relating to unrecognised deferred tax liabilities arising on investments in subsidiaries and branches was $15.9bn (2024: $15.2bn) and the
corresponding unrecognised deferred tax liability was $0.8bn (2024: $0.7bn).