Tax Codes Explained
Updated for 2026/27 IRD rates and thresholds
The full list of NZ tax codes
| Code | Use it for | Rate applied |
|---|---|---|
| M | Main source of income, no student loan | Progressive: 10.5%–39% |
| ME | Main source plus independent earner tax credit | As M, with up to $520 credit |
| SB | Second job, total income up to $15,600 | 10.5% |
| S | Second job, total income $15,601–$53,500 | 17.5% |
| SH | Second job, total income $53,501–$78,100 | 30% |
| ST | Second job, total income $78,101–$180,000 | 33% |
| SA | Second job, total income over $180,000 | 39% |
| SL / SH SL / ST SL / SA SL | Any code with a student loan | Tax rate plus 12% loan deduction |
| NS | New Zealand Superannuation | M-equivalent on pension income |
| STC | Schedular payments to contractors | Flat withholding rate |
| CAE | ACC weekly compensation | M-equivalent |
| EDW | Election-day workers | Flat 17.5% |
Choosing between M and ME
Use ME if you expect your taxable income for the year to fall between $24,000 and $66,000 and you are not receiving a main benefit, Working for Families tax credits or a student allowance. The ME code applies the independent earner tax credit of up to $520 ($10 a week) through PAYE, so you do not have to claim it at year end.
Between $66,000 and $70,000 the credit reduces by 13 cents for every dollar and cuts out at $70,000. If your income is variable, M is the safer default — you can claim the IETC at year end instead of repaying an over-applied credit.
Second jobs: the mistake that costs the most
Secondary codes use your total income from all sources, not the second job's income alone. Two examples that catch people out:
- Main job $40,000 + second job $20,000 = total $60,000. Correct code: SH (30%). Using SB would under-deduct by thousands.
- Main job $60,000 + second job $12,000 = total $72,000. Correct code: ST (33%).
Under-deducting produces a bill at year end; over-deducting produces a refund but locks up your cash interest-free for months. If your hours fluctuate, review the code each April.
Student loan codes in practice
Add SL to whichever code otherwise applies: M SL, ME SL, SH SL and so on. The SL part triggers a 12% deduction on pay above the pro-rated threshold of $24,128 a year — around $464 a week, $927.99 a fortnight or $2,009.75 a month. Student loan deductions are separate from tax: they do not reduce your taxable income and they are not affected by KiwiSaver.
How to change your tax code
- Tell your employer in writing or use the myIR "My tax code" function — no IRD form is needed for standard changes.
- Give payroll the exact code, including SL where relevant.
- Check your first payslip after the change to confirm both the code and the deduction.
- At year end, review the automatic assessment in myIR. A wrong code for part of the year is the single largest cause of unexpected bills.
Tailored and special codes
If your income comes from several sources or includes a lumpy component, IRD can approve a tailored tax code with a rate calculated specifically for you — commonly used for salary plus NZ Super, or salary plus ACC payments. The application is made in myIR, and IRD notifies both you and your employer of the rate to apply.
For schedular payments (a defined list of contracting activities, from forestry and fishing to certain professional services), the payer withholds tax at the rate on the IR330C form. Contractors on schedular payments can elect a lower rate, but the default exists so that tax is paid through the year rather than as a lump sum in February.
Deep dive — 2026 update
Special situations and how they are coded
| Situation | Code to use |
|---|---|
| Salary plus NZ Super | M on one source, NS on the other (or a tailored rate) |
| ACC weekly compensation plus a job | CAE on ACC payments, M or a secondary code on wages |
| Two part-time jobs | M on the higher-paying job, secondary code on the other based on total income |
| Holiday pay paid in a lump sum on leaving | Taxed at the rate that applies to the lump sum using the M code if it is a one-off |
| Bonus or back pay | Taxed through the lump-sum tables, not at your marginal rate on the whole amount |
| Working for an overseas employer while NZ resident | No NZ employer withholding — declare in your IR3 and pay tax on assessment |
The lump-sum point surprises people: a $10,000 bonus is not simply taxed at 33%. IRD's lump-sum tables spread the payment across the year to work out the extra tax, which is why the deduction is usually lower than the marginal rate applied to the full amount.
What happens if your code is wrong
- Too little deducted: you get a bill after the automatic assessment, due by 7 February (7 April for tax agent clients). Pay it — use-of-money interest starts immediately after the due date.
- Too much deducted: you get a refund, normally within 10 working days of the assessment, but your money has been with IRD interest-free in the meantime.
- Wrong code for part of the year: IRD's system squares it up at year end, so correcting the code mid-year still leaves the earlier period to be reconciled.
- Never gave a code: the default is the "no notification" rate, which is deliberately high to discourage not providing one — expect a refund, not a bill.
Check your code on your first payslip of each tax year, and again after any change in jobs. It is a two-minute check that prevents most end-of-year surprises.