PAYE Guide — How It Works, Tax Codes, Secondary Tax
Updated for 2026 IRD rates
What is PAYE?
PAYE (Pay As You Earn) is the system your employer uses to deduct tax from your wages or salary before you receive them. Your employer sends these deductions directly to Inland Revenue on your behalf. The amounts deducted include income tax, ACC earners' levy, KiwiSaver contributions (if you're enrolled), and student loan repayments (if applicable).
PAYE Deductions Detail
Each pay period, your employer calculates the following deductions from your gross pay:
- Income tax — Based on your tax code and the progressive tax rates
- ACC earners' levy — Currently $1.33 per $100 of liable earnings (2025/26 rate)
- KiwiSaver — Your contribution (3%, 4%, 6%, 8%, or 10% — as you chose) plus employer contribution (3% minimum)
- Student loan — 12% of gross earnings above the repayment threshold if you have a student loan
- Child support — If required by a formula assessment from IRD
Tax Codes Explained
Your tax code tells your employer how much tax to deduct. Choose the right code based on your circumstances:
| Tax Code | When to Use |
|---|---|
| M | Main job — you have only one job and are not receiving NZ Superannuation |
| M SL | Main job with a student loan repayment |
| S | Secondary job or second source of income |
| S SL | Secondary job with a student loan |
| SH | Secondary job with a student loan and higher earnings |
| ST | Secondary tax rate for casual agricultural work |
| SB | Secondary tax rate for schedular payments (contractors) |
| CAE | Casual agricultural employees |
| NZ Super | If you're receiving NZ Superannuation or a Veteran's Pension |
| WT | Withholding tax rate — for schedular payments without a tax code form |
Secondary Tax Explained
If you have more than one job, your main job uses the 'M' tax code and your second job uses the 'S' tax code (or 'SH' if your combined income is likely to be over $48,000). Secondary tax rates are higher because they don't account for the lower tax brackets you've already used up in your main job. The secondary tax rate is effectively 17.5%, 30%, 33%, or 39% of your secondary earnings, depending on your expected total income.
How to Change Your Tax Code
You can change your tax code at any time by:
- Using the online tool in myIR — search for 'Change my tax code'
- Completing an IR330 form and giving it to your employer
- Contacting IRD directly
If you change jobs, your new employer will ask you for a tax code on your first day. Make sure you provide the correct one.
PAYE and the End of the Tax Year
At the end of the tax year (31 March), IRD reconciles the PAYE deducted from your pay against your actual tax liability. If too much was deducted, you'll receive a refund. If too little was deducted, you'll need to pay the difference. This is often handled automatically for salary and wage earners through IRD's automatic assessment system.