Tax Codes in New Zealand — Which One to Use

Tax Codes in New Zealand — Which One to Use

Your tax code is a short code that determines how much PAYE is taken from your pay. It is usually the only instruction your employer has about your tax, and almost nobody checks it against their actual circumstances. The payslip still balances, so a wrong code leaves no trace until the year is squared up.

Most people are handed a code when they start a job and never revisit it. Usually that is fine. Occasionally, it’s why a bill arrives months later, or why your own money sat with Inland Revenue instead.

This guide explains which code fits which situation, how secondary codes work, and the two ways a wrong code can cost you money in opposite directions.

How We Researched This Guide

Every rate, band and threshold here comes from Inland Revenue's own published material rather than a second-hand summary of it — the tax rates for individuals page, its tax code guidance, and its page on the Independent Earner Tax Credit.

New Zealand does not tax a second job at some special second-job rate. The same progressive scale applies to your total income, and the code estimates that total before the year ends. It is only an estimate, which is why you need to revisit it whenever your income changes.

The Quick Summary (60-Second Version)

If you read nothing else, read this.

• Your tax code tells your employer which rate to use, based on your total income rather than pay from that one job.
• Your main code applies to your main job; your secondary code applies to anything else, and it is set higher to account for income already taxed elsewhere.
• The secondary codes are SB at 10.5 per cent, S at 17.5 per cent, SH at 30 per cent, ST at 33 per cent and SA at 39 per cent.
• Add SL to your code if you have a student loan — for example M SL or ME SL.
• ACC earners' levy is not deducted from regular secondary income, so a second payslip can look inconsistent with the first.
• If no valid IRD number is provided, earnings are taxed at the top marginal rate.

What a Tax Code Is Actually Doing

Income tax in New Zealand works in slices. Each slice of your income is taxed at the rate that applies to that slice, so the top rate applies only to the part of your income above the threshold. A tax code is how those slices are applied to pay arriving in instalments.

The difficulty is that an employer can only see the income they are paying. With one job and no other income, they can apply the full scale across the year and get very close to right, because they see your whole taxable income.

Add a second source and the picture breaks. Instead of guessing which slice the next dollar falls into, the system applies a flat rate to that second source and leaves the reconciliation to the end of the year.

That is why secondary codes exist, and why a code is not a set-and-forget setting. It estimates your annual income from all sources, and it stops being accurate as soon as that estimate changes.

The Main Codes and the Bands Behind Them

Your main code applies to your primary income — normally your main job, and sometimes a main benefit or pension. It applies the progressive scale properly because a single payer sees your full income for the year.

Those bands have been in force since 1 April 2025. The 39 per cent rate applies only to income above $180,000, so crossing into a higher band does not reprice the income below it.

Two main codes cover most employees. M is the standard code for a main job. ME applies where the Independent Earner Tax Credit applies, and the distinction matters because that credit reaches you through the code rather than a separate payment.

The Secondary Codes, and Why They Are Set Higher

A secondary code goes on any income that is not your main source — a second job, casual work, or a pension alongside employment. These codes are set higher than the bottom rate because that income sits on top of income that has already used up the lower bands.

The word "estimated" is doing real work there. You choose the code based on what you expect your total income from every source to be for the year, not what the second job pays on its own. A modest second job alongside a much larger main income still points to a higher band than the second job's pay would suggest on its own.

Choosing too low a band is the more common error, and it produces a bill. Choosing too high a band produces a refund, but you have lent Inland Revenue the difference for the year at no interest. Both are avoidable.

One quirk is worth knowing before comparing two payslips. ACC earners' levy is not deducted from regular secondary income, so a second job has no ACC levy withheld — one reason a secondary payslip can look wrong even when the code itself is correct.

Student Loans and the SL Suffix

A student loan is not a separate code. It is a suffix added to the main code, so a borrower in their main job might use M SL, while someone entitled to the Independent Earner Tax Credit would use ME SL.

Loan repayments sit alongside PAYE on the payslip rather than inside the tax calculation itself. The two deductions are calculated separately and shown on the same pay advice, which is why the total can look higher than the tax rate alone suggests.

If your circumstances change — a new job, a loan paid off, a second income — the suffix has to be updated along with the code.

What Happens When There Is No Valid IRD Number

Inland Revenue needs an IRD number to match the tax you pay to your record. If you give your employer no number, or the wrong one, the deduction moves to the non-notified rate. Earnings taxed at the non-notified rate are taxed at the top marginal rate.

Too much then comes out of every pay, and you only recover the excess by filing at the end of the year. It is one of the few code errors that reliably hurts, because the money leaves your pay before you ever see it.

Hand your IRD number over before your first payday. Waiting until after the first payslip usually means several pays have been taxed at the wrong rate before anyone notices.

The Two Mistakes That Cost Money in Both Directions

Under-deducting — the bill that arrives later

The first mistake is a code set lower than your total income requires. It produces a smaller deduction each week, which feels fine until the year is assessed and the shortfall lands as a bill. This is most common when a second income feels incidental, or when the code was never updated after a change.

What makes this uncomfortable rather than merely annoying is the timing. You discover the shortfall after the year has closed, by which point the money has been spent, and you must pay it in a lump rather than spread it across the year.

Over-deducting — the interest-free loan

The second mistake is the reverse. A code set higher than your circumstances require takes more from each pay than the year needs. Nothing is lost in the strict sense, but the difference sits with Inland Revenue until the refund is processed, earning you nothing.

Both errors come from the same root cause: the code was set once and never revisited. A short check after any change to your income is usually all that stands between you and either outcome.

Questions You Might Have

Which code do I use if I have two jobs?

Use the main code for the job that pays the most, and a secondary code for the other, based on your expected total income for the year from both sources.

Can I use the same code on both jobs?

No. Each of the two main codes applies the lower bands from the beginning, so the same income gets the benefit of the bottom rates twice. The year ends with an underpayment, and you must settle the shortfall.

Why does my second job have no ACC deducted?

ACC earners' levy is not deducted from regular secondary income. If a second payslip looks inconsistent, that’s usually because of the tax code, not a fault.

What if my income changes part-way through the year?

Update the code when the change happens, rather than waiting until the year ends. A code only works while the estimate behind it is current.

Do I get the Independent Earner Tax Credit automatically?

You receive it either through your employer using the right tax code or by filing a tax return, depending on where your income comes from. It applies in full where before-tax income for the tax year is between $24,000 and $66,000, and it is worth up to $520 a year, or about $10 a week.

What Matters Most

A tax code is a small setting that can have a surprisingly large effect on your cash flow. Set correctly, the year reconciles quietly. Set incorrectly, you either fund a refund you did not ask for or receive a bill you did not expect.

The fix is within your control and takes minutes. Check the code whenever your income changes, put a secondary code on anything that is not your main job, and add SL if you have a student loan.

Everything here is drawn from Inland Revenue's published rates and code guidance. Where a figure could not be confirmed against that source, it is not here.