Sole trader tax in NZ for 2026/27: income tax, ACC and GST

A sole trader and their business are the same taxpayer. There is no separate business tax: your profit (what comes in, less your business expenses) is added to any other income and taxed at the same 2026/27 rates as a salary. The difference is that nothing is taken out as you go. You work out the tax at the end of the year in an IR3, ACC bills you separately, and once your tax gets past a certain size you start paying it in instalments. On a $70,000 profit in 2026/27 that comes to $13,220.50 of income tax plus an ACC earners' levy of about $1,225.00.

How your profit is taxed

Start with your business income for the tax year, which for 2026/27 runs from 1 April 2026 to 31 March 2027. Take off the expenses you incurred in earning it. What is left is your net profit, and that is the figure the tax rates apply to. If you also had a salary, interest or rent, those are added in too, because you are taxed as one person on one total.

The rates are the ordinary individual rates. For 2026/27 they are:

These are the same thresholds Inland Revenue uses for the 2025/26 year in its IR3 return guide, and they carry on unchanged in IRD's 2026/27 payroll specification. Each rate only applies to the slice of income inside its band, so a profit that crosses into the 30% band does not drag the earlier dollars up with it.

Your self-employed income goes in the self-employed income question (Question 24) of the IR3. If you qualify for the independent earner tax credit, it can be claimed on business income too: Inland Revenue lists self-employment among the income it can be received on. It is worth up to $520 for 2026/27 and runs out completely at $70,000 of net income. See our IETC guide for who is eligible.

Worked example: $70,000 of profit in 2026/27

Aroha runs a one-person design business. Her profit for 2026/27 is $70,000, she has no salary and no other income, and her residual income tax for 2025/26 was $9,000. This is what our sole trader tax calculator gives for her year:

Two rates are worth keeping apart. Aroha's effective income tax rate is 18.89%, because most of her profit sits in the lower bands. Her marginal rate is 30%, which is what an extra $1,000 of work would cost her in tax. Our guide to effective and marginal rates explains why both matter.

The ACC line is only the earners' levy. Her invoice will also carry a work levy, set by the industry she works in, and a Working Safer levy, so the real ACC figure will be somewhat higher than $1,225.00. Because her profit is exactly $70,000, she gets no IETC: the credit is nil at that income.

ACC levies arrive on their own invoice

An employee's ACC earners' levy comes out of every pay through PAYE. A sole trader has no PAYE, so nothing is collected during the year. Instead, Inland Revenue passes the earnings from your IR3 to ACC, and the IR3 guide says ACC begins invoicing self-employed levies from September. The invoice covers three things:

• The earners' levy. The regulations set it at $1.52 per $100 of liable earnings for 2026/27 before GST. With GST added that is about $1.75 per $100, the same 1.75% an employee pays.
• The work levy. The rate depends on the classification unit for your industry, so a builder and a bookkeeper pay different amounts.
• The Working Safer levy.

Liable earnings are capped at $156,641 for 2026/27. If you also have a salary, your wages count toward that cap first, so a high salary can leave little or no room for a levy on your business profit.

The full-time minimum of $50,501

If you work full time, which the regulations define as an average of more than 30 hours a week, ACC charges you as though you earned at least $50,501 in 2026/27, even if your profit was lower. Part-time self-employed people, at 30 hours or less on average, are levied on what they actually earned.

Where you also earn wages as an employee, the minimum is reduced by those wages, so the extra charge shrinks as your salary rises.

Small invoices are not collected

The earners' levy regulations treat an invoice as exempt when the earners' levy on it is under $40, and the work levy regulations have a matching rule. In practice a very small amount of self-employed income may not produce an ACC bill at all.

GST: the $60,000 test

GST is a separate tax from income tax. Inland Revenue says you must register for GST if your turnover from a taxable activity "was at least $60,000 in the last 12 months, or you expect it will be at least $60,000 in the next 12 months". Below that, registering is your choice.

Notice that the test looks forward as well as back, and that it uses turnover, not profit. Aroha's $70,000 profit means her sales were higher still, so she is well past the line. A sole trader who lands a large contract early in the year may need to register before most of the money has arrived, because they can already expect to reach $60,000.

How often you file GST returns also affects provisional tax. Six-monthly GST filers on the standard option pay two instalments rather than three, and the ratio option is only open to people who file GST monthly or two-monthly.

When provisional tax starts

Provisional tax is not an extra tax. It is your income tax paid in instalments through the year, and it applies when your residual income tax (your tax less PAYE and other credits, apart from Working for Families) for the previous year was more than $5,000.

Aroha's 2025/26 residual income tax was $9,000, so she pays provisional tax for 2026/27. On the standard option that is last year's figure plus 5%: $9,450, split into three instalments of $3,150, due on 28 August 2026, 15 January 2027 and 7 May 2027.

Her actual 2026/27 tax turns out to be $13,220.50, so after the three instalments she still has $3,770.50 to pay. That balance is due on 7 February 2028, or 7 April 2028 if she uses a tax agent with an extension of time. Because her residual income tax is under $60,000 and she is on the standard option, Inland Revenue only charges interest on the shortfall from the day after that final date. Her standard instalments for 2027/28 will then be based on $13,220.50 plus 5%, which is $13,881 for the year.

Our provisional tax guide covers the other options, the first-year double hit and the interest rates in more detail.

How much to set aside

The simplest habit is a separate bank account and a fixed percentage of every payment you receive. The right percentage depends on your profit. These figures, from the same calculator, cover income tax plus the ACC earners' levy for 2026/27, for a sole trader with no other income who works part time (so the ACC minimum does not apply):

Add a little for the work levy and the Working Safer levy, which depend on your industry. If you work full time on a profit under $50,501, use the ACC figure for the minimum instead: about $883.77 for 2026/27. A percentage is easier to stick to than a dollar target, because it rises and falls with a good or quiet month.

Two moments catch sole traders out. The first is the first year: you may owe no provisional tax, but the whole year's tax still falls due after you file, often around the same time your first provisional instalments for the next year begin. The second is a jump in profit: the standard option is based on last year, so if this year is much better, the gap lands on you at the end. Setting aside on this year's profit, not last year's instalments, covers both.

Filing your IR3 and paying the balance

Every sole trader files an IR3, because business income is not income Inland Revenue already knows about. Inland Revenue says you must file if you received more than $200 of income it has not been told about. For the 2026/27 year:

The return starts from your total income, takes off your expenses to reach taxable income, applies the rates, subtracts credits such as the IETC and any tax already paid, and finishes with a refund or an amount to pay. The IR3 guide walks through what to include and the common mistakes.

This guide is general information, not tax advice. Your own figures depend on your expenses, other income and circumstances, and an accountant can help you with structure, expenses and the best provisional tax option for your business.

Questions people ask

Do sole traders pay a different tax rate from employees?

No. A sole trader's profit is taxed at the same 2026/27 individual rates as a salary: 10.5% up to $15,600, then 17.5%, 30%, 33% and 39% on the bands above. The difference is that no tax is deducted during the year, so you pay it through your IR3 and provisional tax.

How much tax will I pay on $70,000 of profit?

For 2026/27, income tax on $70,000 is $13,220.50 and the ACC earners' levy is about $1,225.00, a total of $14,445.50 or 20.64% of profit. Your ACC invoice will also include a work levy and the Working Safer levy.

What is the ACC minimum for full-time self-employed people?

If you work more than 30 hours a week on average, ACC levies you on at least $50,501 of earnings for 2026/27, even if your profit was lower. Part-time self-employed people are levied on their actual earnings.

When do I have to 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 at least $60,000 in the next 12 months. You can choose to register below that.

When do I start paying provisional tax?

When your residual income tax for the previous year was more than $5,000. Under the standard option for 2026/27 you pay last year's figure plus 5%, in three instalments on 28 August 2026, 15 January 2027 and 7 May 2027.