Tax on interest in NZ: RWT rates and choosing the right one

For the 2026/27 tax year, resident withholding tax (RWT) on interest is deducted at 10.5%, 17.5%, 30%, 33% or 39%, and the right rate is the one that matches the income tax rate on your total taxable income. If your bank has your IRD number but you never picked a rate, it uses 33%. If it has no IRD number for you, it must use 45%. RWT is not a final tax: at year end your interest is added to your income and the RWT counts as tax already paid, so a wrong rate turns into a refund or a bill.

How tax on interest works

Interest is taxable income, the same as your wages. Because a bank cannot know your whole tax picture, it deducts RWT before the interest reaches your account and passes it to Inland Revenue. You see the net amount; your certificate shows the gross interest and the RWT taken.

That deduction is a credit, not the final word. At the end of the tax year your gross interest is added to your other income, tax is worked out on the total, and the RWT you have already paid is subtracted. Inland Revenue's IR3 guide treats RWT on interest as a refundable credit, so if too much was taken you get it back.

A few things worth knowing up front:

• Interest is not liable for the ACC earners' levy, so the only tax on it is income tax.
• Interest of $50 or less may arrive without a certificate, but it still counts as income.
• Getting the RWT rate right does not lower your tax. It just means the right amount is taken as you go, so there is nothing to sort out later.

RWT rates on interest for 2026/27

These are the rates for individuals from Inland Revenue's Using the right RWT tax rate page (updated 23 September 2026). The bands have applied since 31 July 2024 and are the same for 2026/27.

The bands line up with the 2026/27 income tax brackets, which is the point: the rate is meant to match your top tax rate. If you are checking older certificates, the bands before 31 July 2024 were up to $14,000 at 10.5%, $14,001 to $48,000 at 17.5%, $48,001 to $70,000 at 30%, $70,001 to $180,000 at 33% and over $180,000 at 39%.

Companies and trusts have their own lists. A company can choose 28%, 33% or 39% and defaults to 28%. Trustees can choose 17.5%, 30%, 33% or 39%, and testamentary trusts can also use 10.5%.

Choosing the right rate

Inland Revenue's rule is simple: "The rate should match your income tax rate", based on your total taxable income for the year. Total means everything: salary or wages, self-employed profit, net rental income, other income and the interest itself.

Here is what this site's engine suggests at a few total incomes for 2026/27:

Some practical points when you choose:

1. Estimate the year ahead, not last year. RWT is deducted as interest is paid, so base it on what you expect to earn by 31 March 2027.
2. Add the interest in. A $76,000 salary on its own sits in the 30% band, but add $5,000 of interest and your total is $81,000, which points to 33%.
3. Tell every payer. Each bank or payer deducts RWT on the interest it pays you, so each one needs your IRD number and your rate.
4. Revisit it when your income changes. A new job, a pay rise, parental leave or retirement can all move you to a different band.

If your income sits near a band edge, pick the rate you think is most likely. A small gap either way is squared up at year end, as the next sections show.

If you genuinely cannot decide between two rates, weigh the two kinds of mistake. A rate one step too high means a refund after the year ends: Inland Revenue holds the difference for a while, but there is no bill. A rate one step too low means a bill, and Inland Revenue's automatic write-off of small bills does not apply when the rate was wrong. That is why many people lean slightly high.

Worked examples for 2026/27

Each row below uses this site's engine for the 2026/27 tax year. "Tax on the interest" is the tax on wages plus interest, less the tax on wages alone, so it assumes PAYE on the wages was right and nothing else is going on.

The first row is common. A student or part-time worker who opens a savings account and never chooses a rate gets the 33% default, then has $225.00 handed back after the year ends. Choosing 10.5% at the start would have kept that money in their account all year.

The fourth row is the opposite trap. Someone who chose 10.5% years ago, perhaps while studying, and never updated it is now under-deducted. On $3,000 of interest that leaves $585.00 to pay. Run through the full engine with PAYE included, this person's 2026/27 result is $585.02 to pay; the extra 2 cents is rounding in PAYE on the salary.

When interest crosses a band

Take $76,000 of wages and $5,000 of interest in 2026/27. The total of $81,000 points to 33%, so the bank takes $1,650.00. But the first $2,100 of interest fills the 30% band up to $78,100, and only the remaining $2,900 is taxed at 33%. The real tax on the interest is $1,587.00, so the year-end square-up gives back $63.00. That is the system working as designed: you pick the rate that matches your top band, and the small difference comes back automatically.

The 45% rate when the bank has no IRD number

If you have not given a payer your IRD number, it must deduct RWT at the non-declaration rate of 45%. That is higher than any income tax rate.

On $2,000 of interest in 2026/27 that is $900.00 taken, when someone earning $40,000 in wages should have paid $350.00 on it at 17.5%. In the year-end calculation the RWT counts as a credit, so the $550.00 difference comes back to you, but you are without that money until the year is squared up.

The fix is simple: give your bank your IRD number and choose the rate that matches your income. Then you are back on the same footing as everyone else, with any small difference squared up at year end.

What happens at year end if the rate is wrong

The 2026/27 tax year runs from 1 April 2026 to 31 March 2027. After it ends, Inland Revenue adds your gross interest to your income, works out the tax on the total, and subtracts what was already deducted through PAYE and RWT.

• Rate too high: you get the excess back as a refund.
• Rate too low: the shortfall becomes a tax bill. For 2026/27 it is due on 7 February 2028, or 7 April 2028 if you have a tax agent with an extension of time.

If interest is your only income besides salary, wages or other already-taxed income, Inland Revenue normally works this out for you in an automatic income tax assessment, issued from the last weekend in May. If you file an IR3 instead, because you have more than $200 of income that has not been taxed, the gross interest goes in Question 13 (box 13B) and the RWT in box 13A.

Three other rules are worth knowing:

• Inland Revenue writes off a bill of $50 or less automatically, but not if your tax code or rate was wrong. An RWT rate that was too low can cost you that write-off.
• Use-of-money interest is not charged or paid on amounts of $100 or less.
• If your residual income tax for the year is more than $5,000, you will have provisional tax to pay the following year. A big under-deduction on a large term deposit can push you over that line.

How interest affects the rest of your tax

Because interest is part of your taxable income, it can move other numbers too.

Your tax bracket. Interest can lift you into a higher band, as in the $76,000 example. Our effective vs marginal tax rate guide explains why only the dollars above each threshold pay the higher rate.

The independent earner tax credit. IETC is based on your net income from all sources, which includes interest. For 2026/27 the credit starts reducing at $66,000 and reaches nil at $70,000, so interest can trim or remove it if you are close. See our IETC guide.

Your refund or bill. Interest is one of the most common reasons a year-end assessment does not come out at zero. If you want to check yours before Inland Revenue does, enter your wages, interest and RWT in the investment income tax calculator, or read our guide to refunds and bills.

Questions people ask

What RWT rate should I choose on my interest?

The rate that matches the income tax rate on your total taxable income for the year. For 2026/27 that is 10.5% up to $15,600, 17.5% to $53,500, 30% to $78,100, 33% to $180,000 and 39% above that.

Why is my bank deducting 33%?

33% is the default for individuals who have given their IRD number but not chosen a rate. If your income is lower or higher, tell the bank the right rate.

Why is my bank deducting 45%?

45% is the non-declaration rate, used when the bank does not have your IRD number. Give it your IRD number and choose a rate.

Do I get RWT back if my rate was too high?

Yes. RWT on interest is a refundable credit. At year end your interest is added to your income and any RWT over the tax due comes back as a refund.

Do I need to file a tax return because I earn interest?

Not usually. Interest with RWT deducted is included in Inland Revenue's automatic assessment. You file an IR3 if you have more than $200 of other income that has not been taxed.