Self-Employed Tax Guide
Updated for 2026 IRD rates
Being Self-Employed in New Zealand
If you work for yourself as a sole trader, freelancer, or independent contractor, you are considered self-employed by IRD. Unlike employees, your clients do not deduct PAYE from your payments — you are responsible for managing your own tax obligations, including paying income tax, ACC levies, and potentially GST.
Income Tax for Self-Employed People
As a self-employed person, you must pay income tax on your business profits (your total income minus allowable expenses). Tax is paid at the same progressive rates as employees. The key difference is that instead of PAYE, you pay your tax through the provisional tax system.
Provisional Tax for Self-Employed
If your residual income tax (the tax left after credits) is more than $5,000, you must pay provisional tax. This means paying your tax in instalments during the year, rather than a lump sum at the end.
2026 Provisional Tax Instalment Dates:
- First instalment: 28 August 2026 (for GST registered if using ratio option)
- Second instalment: 15 January 2027
- Third instalment: 7 May 2027
You can calculate your provisional tax using one of three methods:
- Standard method: Based on your previous year's tax plus 5%
- Estimation method: Estimate your actual income for the coming year
- Ratio method: Based on your GST turnover (requires GST registration)
If you overpay provisional tax, IRD will refund the excess (with interest). If you underpay, you'll be charged interest (currently 8.72% per annum for the 2026 tax year).
GST Registration
You must register for GST if your business turnover exceeds $60,000 in any 12-month period (or $250,000 for non-profit organisations in some cases). You can also choose to register voluntarily if your turnover is below this threshold — this can be beneficial if you want to claim GST back on your business purchases.
GST returns can be filed:
- Monthly — best if you want regular GST refunds
- Two-monthly — the most common option
- Six-monthly — available if your annual turnover is under $500,000
The current GST rate in New Zealand is 15%.
Allowable Business Expenses
You can deduct expenses that are incurred wholly or principally for your business. Common allowable expenses include:
- Home office expenses: A portion of your rent, mortgage interest, power, rates, and internet based on the floor area or time used for business
- Vehicle expenses: You can claim using the IRD kilometre rate (79¢ per km for 2026 for the first 14,000 km) or logbook method for actual costs
- Equipment and tools: Items costing under $1,000 can be fully expensed; more expensive items are depreciated
- Professional fees: Accountant fees, legal fees, and business consulting costs
- Travel and accommodation: Business-related travel within New Zealand
- Office supplies: Stationery, software, subscriptions, and phone costs
- Marketing: Advertising, website costs, and promotional materials
- Insurance: Business insurance premiums
You cannot deduct capital expenses, private expenses, or fines and penalties.
ACC CoverPlus for Self-Employed
Self-employed people pay ACC levies directly rather than through PAYE. The ACC CoverPlus levy for 2025/26 is $1.56 per $100 of liable earnings. You have the option to choose a higher or lower level of cover — your levy rate will adjust accordingly.
Filing Your Return
As a self-employed person, you must file an IR3 tax return each year (rather than the automatic assessment that wage earners receive). You can file through myIR between April and July following the end of the tax year.
If you use a tax agent, you can get an extension of time to file — typically until 31 March of the following year.
Provisional Tax: Dates, Interest and the $5,000 Trigger
If your residual income tax (tax left to pay after PAYE, RWT and credits) exceeds $5,000, you enter the provisional tax system: three instalments on 28 August, 15 January and 7 May, each based on your previous year's tax (or the standard uplift of 105% of last year, or an estimate). Underpaying triggers use-of-money interest of 8.72% per annum for the 2025/26 year — effectively a penalty-rate loan from IRD. Overpaying earns interest at the lower rate of 2.08%, so there is no arbitrage in overpaying. The practical tip: if your income is growing, use the standard uplift rather than last year's figure to avoid a large April top-up, and review your estimate before the January instalment when your year-to-date profit is clearer.
Record-Keeping That Survives an IRD Review
Self-employed taxpayers must keep records for seven years: income records (invoices, bank statements, payment gateway reports), expense receipts, and mileage logs for vehicle use. IRD accepts electronic records, but they must be complete and retrievable. The expenses that most often survive scrutiny are genuinely business-related and proportioned for private use — home office costs apportioned by floor area, vehicle costs apportioned by business kilometres, and tools or subscriptions used for the work. The claims that most often fail are personal items dressed up as business costs and 100% claims on shared assets. If you are GST-registered, remember GST is collected on your sales and claimed back on business purchases — mixing personal spending into GST claims is a common (and expensive) audit finding.
Related Guides
Deep dive — 2026 update
Provisional tax: the three dates that matter
If your residual income tax for the year is more than $5,000 you must pay provisional tax the following year. With the standard March balance date the instalments fall on 28 August, 15 January and 7 May (or 28 June and 28 November for the two-instalment option).
| Method | Amount | Who it suits |
|---|---|---|
| Standard uplift | 105% of last year's RIT (110% if the prior return is not filed) | Stable or growing income |
| Estimate | Your own forecast of the year's tax | First year of business, or income dropping sharply |
| Ratio option (GST-linked) | Based on GST ratios, six instalments | Fluctuating income, GST-registered |
| AIM (accounting income method) | Pay tax as you earn it, through your accounting software | Most small businesses; includes an interest concession |
Worked example: $14,000 of tax for 2025/26 gives provisional tax of $14,700 for 2026/27 — three instalments of $4,900.
GST: facts every contractor needs
- Threshold: $60,000 of taxable turnover in any 12 months, measured excluding GST.
- Due dates: the 28th of the following month, except periods ending 31 March (7 May) and 30 November (15 January).
- Basis: invoice basis (GST payable when you invoice) or payments basis (only when paid) — the latter if turnover is under $2 million.
- Voluntary registration: below the threshold you can still register to claim GST on startup costs — usually worthwhile if your customers are GST-registered businesses.
Record-Keeping Checklist for IRD
- Keep records for 7 years — invoices, statements, receipts, mileage logs and GST workings.
- Separate business and personal spending — a dedicated business account removes most reconciliation disputes.
- Logbook your vehicle for three months every three years, or use IRD's kilometre rates.
- Home office: claim by floor area percentage (a 10 m² office in a 100 m² house is 10% of rates, insurance, power and interest) or IRD's square-metre rate.
Most-commonly-missed deductions: professional subscriptions, home-office costs, business phone and internet, and ACC invoices.