Tax on side income in NZ for 2026/27: a side hustle beside a job

Your employer's PAYE is set up to tax your salary and nothing else. When you earn money on the side, from a small business, freelance work or selling something you make, that profit is added to your salary and taxed as part of one total for the year. Because it sits on top, it is taxed at your highest rate, not your average. On a $55,000 salary in 2026/27, a $12,000 side profit adds $3,600.00 of income tax, and none of it has been paid yet. You settle it by filing an IR3 after the year ends.

How side income stacks on your salary

New Zealand taxes individuals on their total income for the year. There is no separate rate for a second business. Your salary fills the tax bands first, and your side profit starts wherever your salary stopped.

For 2026/27 the bands are 10.5% up to $15,600, 17.5% from $15,601 to $53,500, 30% from $53,501 to $78,100, 33% from $78,101 to $180,000, and 39% above that. If your salary is $55,000, you are already in the 30% band, so the first dollar of side profit is taxed at 30%. That is your marginal rate, and it is the one that matters here. Our guide to effective and marginal rates explains the difference.

Side profit is what you earn less the expenses of earning it. Taxable income is your total income less allowable expenses, and less any losses carried forward. If you are paid as a contractor for work that is on the schedular payments list, your client may withhold tax from each payment; that withheld tax counts as a credit against your bill. For most side businesses nothing is withheld at all.

Worked examples: $12,000 of side profit at different salaries

Here is what a $12,000 side profit costs in 2026/27 at six salary levels. The extra income tax is the tax on salary plus side profit, less the tax on the salary alone. The ACC column is the earners' levy on the side profit, which ACC invoices separately. All figures are from this site's calculator.

Three things stand out.

The same $12,000 costs more as your salary rises. At $35,000 the side profit is taxed at 17.5%; at $190,000 it is 39%. The work is the same; the slice of the tax bands it lands in is not.

A side profit can straddle a threshold. At $75,000, the first $3,100 of side profit fills the 30% band up to $78,100 ($930.00 of tax) and the remaining $8,900 is taxed at 33% ($2,937.00). Together that is the $3,867.00 in the table.

A high salary uses up the ACC cap. For 2026/27 the earners' levy stops at $156,641 of liable earnings, and your wages count toward that first. At $160,000 your salary is already past the cap, so there is no earners' levy on the side profit. You still pay income tax on every dollar.

In every row, PAYE on the salary is correct for the salary, so the extra income tax is roughly what you will owe when you file. Run your own numbers on the income tax calculator.

Watch the independent earner tax credit

If you are on the ME tax code, your employer gives you the independent earner tax credit through your pay: $520 a year for 2026/27 on income from $24,000 to $66,000, reducing by 13 cents for every dollar above $66,000 and gone at $70,000. PAYE works out that credit from your salary alone. Inland Revenue works it out at the end of the year on your total net income, side profit included.

Take a $55,000 salary and a $12,000 side profit. On the salary alone the credit is $520.00. On $67,000 of total income it is $390.00. You received the full $520.00 through PAYE, so the $130.00 difference is added to your bill. Your year-end amount to pay becomes $3,730.10 rather than $3,600.00.

A side profit large enough to take you to $70,000 or more removes the credit entirely, so the whole $520.00 comes back. Our IETC guide covers eligibility and the monthly rules.

Filing an IR3 for your side income

If your only income is salary, wages and investment income already taxed at source, Inland Revenue normally sends you an automatic assessment and you do not file anything. Side income changes that. Inland Revenue says you must file an individual income tax return (IR3) if you received more than $200, before tax, of income it has not been told about.

On the IR3 your salary goes in with the PAYE deducted, and your self-employed income goes in the self-employed income question (Question 24), after expenses. The return adds everything up, works out the tax on the total, takes off the PAYE and other credits, and shows what is left to pay. For the 2026/27 year:

One thing an IR3 filer loses: the automatic write-off of small bills of $50 or less does not apply if you file an IR3. See who files an IR3 for the full checklist.

Set aside your marginal rate, plus ACC

Because side profit is taxed at your top rate, the safe amount to put away from every payment is your marginal rate plus the ACC earners' levy. For 2026/27:

Use the band your total income will finish in, not your salary alone. If the side profit will push you over a threshold, use the higher rate for the whole lot; you will have a little left over rather than a little short.

On a $55,000 salary with $12,000 of side profit, that is $3,600.00 of income tax plus $210.00 of earners' levy, or about $317.50 a month through 2026/27. A separate savings account keeps it out of reach. Your ACC invoice will also include a work levy for your industry and a Working Safer levy, so round up.

ACC on side income

ACC's earners' levy on your wages is taken through PAYE. On self-employed earnings it is not, so after you file, Inland Revenue passes your IR3 figures to ACC, which invoices you. The IR3 guide says people with both kinds of income pay levies on both, up to the maximum, and that ACC begins invoicing self-employed levies from September.

For 2026/27 the earners' levy is $1.52 per $100 before GST, which is about 1.75% once GST is added. Two rules soften it for people with a job:

• The cap counts your wages. Liable earnings stop at $156,641, wages first. A salary near or above the cap leaves little or no levy on the side profit.
• The full-time minimum is reduced by your wages. Self-employed people who work more than 30 hours a week on average are levied on at least $50,501 for 2026/27, but the regulations take your employee earnings off that minimum. With a salary of $50,501 or more, the minimum adds nothing.

If the earners' levy on an invoice would be under $40, the regulations treat the invoice as exempt, so a very small side income may never produce an ACC bill.

When a side business grows: provisional tax and GST

Two thresholds turn a side hustle into something with more paperwork.

Provisional tax at $5,000. Your residual income tax is the tax still owing after PAYE and other credits. If it is more than $5,000 for a year, you pay provisional tax the following year. PAYE covers the salary, so it is roughly the tax on the side profit that counts. At a $95,000 salary, a $12,000 side profit leaves about $3,960.00 to pay for 2026/27, under the line. A $20,000 side profit at the same salary leaves $6,600.00, which is over it, so 2027/28 brings standard instalments of last year's figure plus 5%. See the provisional tax guide.

GST at $60,000 of turnover. You must register for GST when your turnover from a taxable activity was at least $60,000 in the last 12 months, or you expect it to be in the next 12. That is turnover, not profit, and it looks ahead as well as back.

If your side income is becoming your main income, the sole trader guide covers the full picture.

Common slips with side income

• Setting aside your average rate. Someone on $75,000 pays 19.63% of their salary in income tax overall in 2026/27 ($14,720.50), but their side profit is taxed at 30% and 33%. Saving 20% of side income leaves a gap.
• Assuming PAYE has it covered. PAYE only ever sees your salary. Nothing on your payslip changes because you earn money elsewhere.
• Waiting for an automatic assessment. Once you have more than $200 of income Inland Revenue does not know about, you need to file an IR3 yourself. An automatic assessment built on your salary alone would be wrong.
• Forgetting the ACC invoice. It comes from ACC, not Inland Revenue, and arrives separately after you file, so it is easy to spend the money twice.
• Counting turnover as profit, or profit as turnover. Income tax is on profit after expenses. The GST registration test is on turnover before expenses.

Questions people ask

Is side hustle income taxed at a different rate?

No. It is added to your salary and taxed at the ordinary 2026/27 rates, which means the side profit is taxed at your highest rate. On a $55,000 salary that is 30%, so $12,000 of side profit adds $3,600.00 of income tax.

Do I have to file a tax return for a side hustle?

Yes, if you received more than $200 of income Inland Revenue has not been told about. You file an IR3, due 7 July 2027 for the 2026/27 year, or later with a tax agent's extension of time.

How much of my side income should I put aside?

Your marginal rate plus 1.75% for the ACC earners' levy. For 2026/27 that is 19.25% if your total income is up to $53,500, 31.75% up to $78,100, and 34.75% up to $156,641.

Does side income affect the independent earner tax credit?

Yes. IETC is worked out on your total net income. With a $55,000 salary and $12,000 of side profit in 2026/27, the credit falls from $520.00 to $390.00, adding $130.00 to your bill.

Will I pay ACC on my side income?

Usually, as an invoice after you file. For 2026/27 the earners' levy is about 1.75% including GST, but wages count toward the $156,641 cap first, so a high salary can leave no levy on the side profit.