Tax guide · 7 min read
Which NZ Tax Code Should I Use?
Your tax code is two or three letters that tell payroll how much PAYE and student loan to deduct. Get it right and your end-of-year tax position lands close to zero. Here is how to pick it — and how to fix it if it is wrong.
Start with three questions
Every New Zealand tax code comes out of the same three questions on the IR330 Tax code declaration:
- Is this your main job? Your main job is the one paying your highest income. Everything else is secondary.
- Do you have a New Zealand student loan? If yes, your code gets the SL suffix.
- Do you qualify for the independent earner tax credit (IETC)? If yes, and you are not receiving Working for Families, a main benefit or NZ Super, your main-job code becomes ME instead of M.
The codes, in plain English
| Code | Use it when | What payroll does |
|---|---|---|
| M | Main job, no student loan, no IETC | PAYE at the normal graduated rates |
| M SL | Main job, you have a student loan | PAYE plus 12% student loan above the threshold |
| ME | Main job and you qualify for the IETC | PAYE reduced by the independent earner tax credit |
| ME SL | Main job, IETC and a student loan | Reduced PAYE plus student loan deductions |
| SB / SB SL | Secondary job, total income in the lowest band | Flat 10.5% (plus loan if SL) |
| S / S SL | Secondary job, total income in the second band | Flat 17.5% (plus loan if SL) |
| SH / SH SL | Secondary job, total income in the third band | Flat 30% (plus loan if SL) |
| ST / ST SL | Secondary job, total income in the fourth band | Flat 33% (plus loan if SL) |
| SA / SA SL | Secondary job, total income above the top threshold | Flat 39% (plus loan if SL) |
| ND | No IR330 given to the employer | Deductions at the highest non-notified rate — fix this |
Note the pattern: main-job codes use the graduated bands, while secondary codes apply a single flat rate chosen to match the band your combined income falls into. Our tax code calculator picks the right one from your income, and secondary tax explained covers why that flat rate is not a penalty.
The most common mistakes
- M on two jobs. Both employers then give you the lower bands, so you are collectively under-taxed and get a bill. Only one job can be M.
- Forgetting SL. No student loan deductions come out, your loan does not reduce, and Inland Revenue treats the shortfall as arrears. This is the most expensive error on the list.
- Using ME without qualifying. If you receive Working for Families, a main benefit or NZ Super, or your income is outside the IETC range, ME under-deducts and you owe the credit back.
- Leaving ND in place. Some people notice a huge deduction on their first pay and assume it is normal. It is not — hand in the IR330.
- Never updating after a change. Finishing a student loan, dropping a second job, or a big pay rise can all change the correct code.
What happens if your code is wrong
Nothing punitive happens immediately — the code only controls the pace of deductions during the year. Inland Revenue squares it up in your end-of-year assessment:
- Under-deducted — you get a bill. Small amounts can usually be paid or arranged in instalments.
- Over-deducted — you get a refund, but you have gone without that money all year.
Either way the fix is the same and takes minutes: give your employer a new IR330 (or change it in payroll self-service) and the new code applies from the next pay run. You do not need to contact Inland Revenue to change an employment tax code.
Check the effect before you switch
Because a code change alters your net pay immediately, it is worth seeing the number first. The PAYE calculator shows what each code deducts on your salary per week, fortnight and month, and the after-tax pay calculator gives the resulting take-home.
Code definitions and eligibility rules on this page follow Inland Revenue's IR330 guidance and its tax codes for individuals page, re-checked on the review date below. IETC eligibility in particular has income limits and exclusions that change with legislation — confirm your own position with Inland Revenue. This is general information, not tax advice.
Work out your code and its effect
Pick the code, then see exactly what it does to your pay.
Frequently asked questions
Which tax code should I use in New Zealand?
For most people it is M: this is your only or highest-earning job and you have no student loan. Add SL if you have a New Zealand student loan (M SL). Use ME instead of M if you qualify for the independent earner tax credit, and use a secondary code (SB, S, SH, ST or SA) for any job that is not your main one.
What does the M tax code mean?
M means this is your main job — the one paying your highest income — and you do not have a student loan or qualify for the independent earner tax credit. It is the most common code in New Zealand.
What is the difference between M and ME?
ME adds the independent earner tax credit, which is available to people in a defined middle income range who do not receive Working for Families, a main benefit, or NZ Super. If you qualify, ME reduces the PAYE deducted each pay day compared with M.
What does SL mean on my tax code?
SL is the student loan repayment flag. Adding it to your main code (M SL or ME SL) tells payroll to deduct 12% of every dollar you earn above the repayment threshold. Without SL, no repayments come out and you can end up in arrears with Inland Revenue.
What happens if I use the wrong tax code?
You end up either under-taxed or over-taxed. Under-taxed means a bill at the end of the tax year; over-taxed means you have lent Inland Revenue money and get it back in your end-of-year assessment. Neither is a penalty, but both are avoidable — you can change your code at any time by giving your employer a new IR330.
What is the ND tax code?
ND means 'no declaration'. If you do not give your employer a completed IR330, they must deduct at the highest non-notified rate, which is well above what most people should pay. It is always worth fixing immediately.
How do I change my tax code?
Complete a new IR330 Tax code declaration and give it to your employer, or update it in your payroll self-service portal. The change applies from the next pay period — you do not need to contact Inland Revenue.