The right PAYE tax code for your situation.
Suggested tax code
—
Your breakdown
Updates live as you type| Question | This case |
|---|
The two letters that decide your take-home pay
Your tax code is the short instruction you hand your employer that tells them how much PAYE to deduct from each pay. Get it right and your tax roughly squares up over the year. Get it wrong and you either go short every payday, lending IRD money you could have used, or you under-pay and face a bill when Inland Revenue reconciles your income after 31 March. The codes look cryptic, but they encode just a few facts: whether this is your main job, whether you qualify for the Independent Earner Tax Credit, whether you have a student loan, and for second jobs, how much you earn in total. This tool reads those facts and hands back the code that fits.
It helps anyone starting a job, picking up extra work, finishing study, or simply unsure whether they should be on M or ME. The output is a guide to confirm with your employer or IRD, not a ruling.
M, ME, and the Independent Earner Tax Credit
Your highest-earning job almost always takes the M code. The exception is ME, which you use when your main job also makes you eligible for the Independent Earner Tax Credit. The IETC is worth up to $520 a year for earners who are not on a benefit, NZ Super, or Working for Families. This calculator treats you as ME-eligible when your income for the job sits between $24,000 and $48,000 and you have ticked nothing in the exclusions. The point of ME is that the credit is fed to you through your pay across the year, rather than waiting for a lump sum at the end. If you collect a benefit or Working for Families, you are excluded, and the tool keeps you on plain M.
Worked example: a $40,000 main job
Suppose this is your only job, you earn $40,000, you have no student loan, and you receive no benefit or Working for Families. Walk through the logic the tool applies.
Because $40,000 falls inside the IETC window, the answer is ME rather than M, and the credit flows through your pay. Slide the income to $50,000 and the same logic returns plain M, since you have moved past the $48,000 ceiling. The number line below shows where the IETC window sits.
Second jobs and the secondary codes
If a job is not your main one, it takes a secondary code, and the right one depends on your combined income across every job. The bands are SB up to $15,600, S to $53,500, SH to $78,100, ST to $180,000, and SA above that, mirroring the income tax thresholds of 10.5, 17.5, 30, 33, and 39 percent. The aim is to withhold enough on the second income so you are not caught short. If your main job pays $50,000 and a weekend job adds $15,000, your total of $65,000 puts the second job on SH. Pick a band that is too low and not enough tax comes out, which is the classic cause of an end-of-year bill.
When should I add SL to my code?
Add SL whenever you have a New Zealand student loan and earn over the repayment threshold, which the tool appends to any code, so M becomes M SL and S becomes S SL. Repayments are deducted at 12 cents in the dollar above the threshold, alongside your PAYE. If you have a loan but earn under the threshold across all sources, you can ask IRD about a repayment deduction exemption so money is not taken unnecessarily.
What happens if I use the wrong tax code?
Nothing dramatic on the day, but it catches up with you. Too high a code, such as a secondary code well above your real combined income, means too much tax is withheld and you wait until after year end for the refund. Too low a code means too little comes out and you owe the difference. You can change a code at any time by giving your employer an updated IR330, so if your circumstances shift, fix it promptly rather than waiting for the annual reconciliation.