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.