How much should I set aside for tax, and what can I pay myself?
About $23.50 of every $100 at $90,000 profit goes on income tax and the ACC earners' levy. Free NZ calculator: what to set aside each week and what's left to pay yourself.
What this guide covers
For a sole trader on $90,000 profit, about $23.50 in every $100 goes on income tax and the ACC earners' levy.
Who this is for
This page is for sole traders. That means you run the business in your own name, not as a company. Company owners have different rules. Ask your accountant.
Profit here means taxable profit: sales minus the business costs IRD allows. If you are GST registered, leave GST out of both. If you are not registered, count your sales and costs including GST. That is IRD's rule on the IR3B business income form.
A worked example
Here is an example business. A sole-trader electrician expects a profit of $90,000 this year. They work full time in the business.
Step 1. Income tax on $90,000. IRD (Inland Revenue) taxes each slice of income at its own rate:
First $15,600 at 10.5%: $1,638
Next $37,900 at 17.5%: $6,632.50
Next $24,600 at 30%: $7,380
Last $11,900 at 33%: $3,927
Income tax: $19,577.50
Step 2. ACC earners' levy. ACC is the Accident Compensation Corporation. Its earners' levy pays for injury cover.
$90,000 × 1.75% = $1,575
For full-time CoverPlus owners (over 30 hours a week), ACC uses at least $50,501 for the earners' levy in 2026/27. The 1.75% rate is an estimate and includes GST. ACC's own guide gives $1.52 per $100 before GST, so an invoice can differ a little.
Step 3. Add them up.
$19,577.50 + $1,575 = $21,152.50 a year
$21,152.50 ÷ 52 = about $407 a week to set aside
$21,152.50 ÷ $90,000 = about $23.50 in every $100 of profit
Step 4. What is left for you.
$90,000 − $21,152.50 = $68,847.50 a year
$68,847.50 ÷ 52 = about $1,324 a week
So this owner could move about $407 a week into a tax account. About $1,324 a week is profit left after tax and ACC, before other cash needs. Stock, loan repayments and equipment still need cash.
Two things are not in that sum:
GST. If you are GST registered, the GST you collect is IRD's money too. Set it aside on top. The GST calculator works it out.
ACC work levy. ACC also charges a levy based on your type of work. It comes on your ACC invoice. Type that invoice into the calculator if you have it. Use your profit before that invoice comes off, so it is not counted twice.
When ACC bills you: ACC sends its invoice after you file your tax return. For a new business, that is usually in the second year.
The second-year squeeze
Your first year in business is not tax free. IRD just asks for the tax later. This is the money trap that catches new owners.
Here is the example again. The electrician started on 1 April 2025. Their first tax year ended on 31 March 2026. Profit that year was $60,000.
Income tax on $60,000: $10,220.50
Due: 7 February 2027, which moves to Tuesday 9 February (see below). With an eligible tax-agent extension, it is usually 7 April 2027.
This example assumes no tax was already taken off. Their residual income tax is the tax left to pay after tax already taken off. It is more than $5,000. So in the second year, they also pay provisional tax. That means paying this year's tax in parts, during the year.
This assumes the first return was filed before 28 August 2026, with 3 equal standard-option payments.
IRD's standard way: last year's tax plus 5%
$10,220.50 × 1.05 = $10,731.53
Split over 3 payments = about $3,577 each
Due dates: 28 August, 15 January and 7 May
Now look at January and February 2027:
15 January 2027: about $3,577 (second-year payment)
7 February 2027: the first-year bill of $10,220.50. That is a Sunday, and 8 February is Waitangi Day observed, so the last day to pay is Tuesday 9 February.
Together: about $13,798 in under 4 weeks
The exact amounts depend on when your return is filed. Check your own dates and amounts in myIR, or with your accountant. A date that falls on a weekend or holiday can move to the next working day.
What good looks like
Good: a separate bank account for tax. Money goes in every time you are paid, not when the bill comes.
The rules that set the figure (IRD, checked 9 November 2026). Income tax on each dollar in each band:
Up to $15,600: 10.5%
$15,601 to $53,500: 17.5%
$53,501 to $78,100: 30%
$78,101 to $180,000: 33%
Over $180,000: 39%
ACC earners' levy: $1.75 per $100, from 1 April 2026 to 31 March 2027. It stops at $156,641 of earnings.
Provisional tax: starts when last year's residual income tax was more than $5,000.
Due dates with a 31 March year end: 28 August, 15 January and 7 May.
The share you set aside goes up as profit goes up (income tax plus earners' levy):
$40,000 profit (full-time CoverPlus): $6,791.77, about $17 in every $100
$60,000 profit: $11,270.50, about $18.80 in every $100
$90,000 profit: $21,152.50, about $23.50 in every $100
Part-time owners on $40,000 have an estimated $6,608 total, because the $50,501 ACC minimum is for full-time owners.
Common mistakes
Spending the whole bank balance. Part of it belongs to IRD and ACC. It only looks like yours.
Thinking the first year is tax free. It is not. The bill just comes later, often next to the next year's payments.
Mixing GST and income tax. They are two bills. Set aside for both.
Waiting for the bill to arrive. By then the money has often gone on stock, wages or you. Set it aside each week instead.
More help — links checked 9 and 10 November 2026
IRD's provisional tax page: Who pays it, the 4 ways to work it out, and links to myIR. Free. https://www.ird.govt.nz/income-tax/provisional-tax
IRD fact sheet IR325, "Income tax in your first year of business": A short PDF (April 2022) on the first-year bill. Free. https://www.ird.govt.nz/-/media/project/ir/home/documents/forms-and-guides/ir300---ir399/ir325/ir325-2022.pdf
myIR: IRD's own account. It shows your real due dates and amounts. Free. https://www.ird.govt.nz/myir-help
Free business advice: Find local support through the national Regional Business Partner network. https://www.business.govt.nz/strategy-and-performance/regional-business-partner-network
An accountant: Worth it if your profit jumps, or you are thinking about becoming a company. Ask for a fixed price for your tax return and provisional tax, and compare 2 quotes.
Ask an AI assistant: Copy the prompt below. Check its sources and tax year, and ask your accountant or IRD to check the figures before you use them.
AI prompt
I am a sole trader in New Zealand. My expected profit is $[profit]. I [am/am not] GST registered. Registered owners leave GST out; others count costs including GST. I work [hours] a week and have [CoverPlus/other cover]. Estimate weekly income tax and the ACC earners' levy. Check current official IRD and ACC sources, including minimum and maximum earnings. Show each step, sources, assumptions and exclusions.
The steps
Open a second bank account and name it "Tax". Your bank can set one up.
Find last year's profit. It is on your last tax return, or in myIR. Type it into the calculator.
Set up an automatic weekly transfer of the set-aside amount into the Tax account.
Sources — checked 9 and 10 November 2026
Tax set-aside calculator: /tools/tax-set-aside-calculator
GST calculator: what to set aside for GST: /tools/gst-calculator#set-aside
Profitable but no cash? Read the cash guide: /guides/profitable-but-no-cash-small-business-nz
Cash calculator: /calculators/cash
IRD, tax rates for individuals (from 1 April 2025) — checked 9 Nov 2026: https://www.ird.govt.nz/income-tax/income-tax-for-individuals/tax-codes-and-tax-rates-for-individuals/tax-rates-for-individuals
IRD, ACC earners' levy rates ($1.75 per $100, 2026–27, cap $156,641) — checked 9 Nov 2026: https://www.ird.govt.nz/income-tax/income-tax-for-individuals/acc-clients-and-carers/acc-earners-levy-rates
ACC, calculating your levies (full-time minimum and cap) — checked 10 Nov 2026: https://www.acc.co.nz/for-business/received-an-invoice/calculate-your-levies
ACC, levy results (minimum applies to Work and Earners levies) — checked 10 Nov 2026: https://www.acc.co.nz/about-us/our-levies-2/levy-results
ACC, understanding your levy invoice — found 9 Nov 2026: https://www.acc.co.nz/for-business/received-an-invoice/understanding-your-levy-invoice
ACC Levy Guidebook 2026/27 ($1.52 per $100 before GST) — found 9 Nov 2026: https://www.acc.co.nz/assets/business/Levy-Guidebook-2026-2027.pdf
IRD IR3B, schedule of business income (GST in or out of profit) — checked 10 Nov 2026: https://www.ird.govt.nz/-/media/project/ir/home/documents/forms-and-guides/ir1---ir99/ir3b/ir3b-2024.pdf
IRD, provisional tax (the $5,000 line) — checked 9 Nov 2026: https://www.ird.govt.nz/income-tax/provisional-tax
IRD, standard option (last year plus 5%) — checked 9 Nov 2026: https://www.ird.govt.nz/income-tax/provisional-tax/provisional-tax-options/standard-option
IRD, payment dates for provisional tax — checked 9 Nov 2026: https://www.ird.govt.nz/income-tax/provisional-tax/paying-your-provisional-tax/payment-dates-for-provisional-tax
IRD, paying tax in your first year in business — checked 9 Nov 2026: https://www.ird.govt.nz/income-tax/provisional-tax/paying-tax-in-your-first-year-in-business
IRD tax calendar IR328 (next working day) — checked 10 Nov 2026: https://www.ird.govt.nz/-/media/project/ir/home/documents/forms-and-guides/ir300---ir399/ir328/ir328-2026-27.pdf
These are general examples, not tax, legal or financial advice. Your own tax depends on your full situation: other income, tax credits, student loans and your business structure. Check with your accountant or IRD. Read our disclaimer: /disclaimer
How much should I put aside for tax as a sole trader in NZ?
It depends on your profit. At $60,000 profit it is about $18.80 in every $100 for income tax and the ACC earners' levy. At $90,000 it is about $23.50. The calculator works out your figure.
Do I pay tax in my first year of business?
Yes. Your first year is not tax free. The bill is usually due on 7 February after the year ends, or 7 April if you have a tax agent.
What is provisional tax?
It is paying this year's income tax in parts, during the year. You have to pay it when last year's residual income tax was more than $5,000. That is the tax left to pay after tax already taken off.
When is provisional tax due?
With a 31 March year end and the standard option: 28 August, 15 January and 7 May. Other options have other dates. Check yours in myIR.
How much can I pay myself from my business?
Start with your profit. Take off the tax and ACC you will owe. What is left is profit after tax and ACC, before other cash needs such as stock, loan repayments and equipment.