NZ Tax Rates 2025 - 2026
New Zealand uses a progressive PAYE (Pay As You Earn) tax system, where your income is taxed in slices with each portion falling into a different tax bracket and taxed at its corresponding rate.
For the 2025 – 2026 tax year, income tax rates range from 10.5% to 39%, depending on how much you earn. There are five core tax bands: 10.5%, 17.5%, 30%, 33% and 39% according to Inland Revenue (IRD).
This simplified structure makes it easier to understand how much tax you’re paying at each level of income. Importantly, the marginal rate applies only to the income within each bracket, not your entire salary. So, as your income increases, only the amount above each threshold is taxed at the higher rate.
2025 tax brackets and rates
The table below shows the official income tax rates and brackets for the tax year running from 1 April 2025 to 31 March 2026. Your total earnings during this period will either be:
- Automatically assessed by Inland Revenue (IRD), or
- Included in your individual tax return, which is due by 7 July 2026.
This is a progressive tax system, where different portions of your income are taxed at different rates. The marginal tax rate applies only to the income that falls within each bracket — not to your full salary. For example, if you earn above a threshold, only the amount above that threshold is taxed at the higher rate.
| Taxable Income Bracket | Tax Owed | Marginal Tax | Max Tax of Bracket | Cumulative Tax |
|---|---|---|---|---|
| $0 – $15,600 | 10.50% of taxable income | 10.5% | $1,638 | $1,638 |
| $15,601 – $53,500 | $1,638 + 17.50% of the amount over $15,600 | 17.5% | $6,633 | $8,271 |
| $53,501 – $78,100 | $8,271 + 30.00% of the amount over $53,500 | 30.0% | $7,380 | $15,651 |
| $78,101 – $180,000 | $15,651 + 33.00% of the amount over $78,100 | 33.0% | $33,693 | $49,344 |
| $180,001 and over | $49,344 + 39.00% of the amount over $180,000 | 39.0% | — | $49,344 + 39% |
How tax brackets and rates work in New Zealand
New Zealand uses a progressive income tax system, which means your income is taxed in layers. As your income increases, only the portion that falls within each bracket is taxed at that bracket’s rate not your entire income and people with lower income are subject to lower income tax rates.
Your taxable income is divided into segments (called tax brackets), and each segment is taxed at a different marginal tax rate. These rates currently range from 10.5% to 39%, depending on how much you earn.
The key idea is this: even if your income falls into a higher tax bracket, you don’t pay that rate on all your earnings — just on the amount that sits within that bracket. For example, someone earning $80,000 pays lower rates on the first $78,100, and only the income above that gets taxed at the higher rate.
This structure ensures that everyone pays a fair share relative to their income, while benefiting from lower rates on the first portion of what they earn.
What is a marginal tax rate?
In New Zealand, your marginal tax rate is the rate of income tax you pay on your next dollar earned. It reflects the highest tax bracket that your income falls into but it only applies to the portion of income within that bracket, not your entire earnings.
For example, if you earn $35,000 in the 2025 – 2026 tax year, the first $15,600 is taxed at 10.5%, and the income between $15,601 and $35,000 is taxed at 17.5%. So your marginal tax rate is 17.5%, meaning if you earned one more dollar, you’d pay 17.5 cents in tax on that extra dollar.
Understanding your marginal tax rate helps you make informed decisions about things like bonuses, KiwiSaver contributions, or taking on extra work since only the income within the higher bracket gets taxed at that rate.
What is an effective tax rate?
Your effective tax rate in New Zealand is the average percentage of your total taxable income that you actually pay in income tax. It reflects how much of your income goes to tax overall not just the rate in your highest tax bracket.
To calculate your effective tax rate, divide the total amount of tax you owe by your total taxable income.
For example, if you earn $60,000 and your total PAYE tax for the year is $10,500, your effective tax rate is:
$10,500 ÷ $60,000 = 17.5%
Even though your marginal tax rate might be 30%, your effective tax rate is usually much lower, because the first portions of your income are taxed at the lower rates of 10.5%, 17.5%, and so on.
This gives you a clearer picture of your overall tax burden.
How to reduce taxes owed
In New Zealand, income tax is automatically deducted from your pay through the PAYE (Pay As You Earn) system. This means your employer withholds tax on your behalf each payday. In most cases, this ensures you’re paying the right amount across the year.
However, there are still legitimate ways to reduce the total tax you owe or increase your refund at the end of the tax year.
1. Claiming Tax Credits
Tax credits directly reduce the amount of tax you pay. One of the most common is the donation tax credit, which allows you to claim back 33.33% of eligible charitable donations (up to your total income). For example, if you donate $300 to registered charities, you can get $100 back from Inland Revenue.
2. Claiming Tax Deductions
Deductions reduce your taxable income, the amount that gets taxed. For example, if you’re self-employed or earn rental income, you may be able to deduct business expenses like accounting fees, vehicle costs, or insurance premiums related to that income.
By lowering your taxable income, deductions can reduce the total tax you owe and, in some cases, push you into a lower marginal tax bracket, meaning less of your income is taxed at the higher rates.
2021-24 tax brackets and rates
From the 2021–22 income year onward, a new top personal tax rate of 39% was introduced for individuals earning over $180,000 annually. This change was enacted through the Taxation (Income Tax Rate and Other Amendments) Act 2020, which updated key sections of the Income Tax Act 2007 and the Tax Administration Act 1994.
The legislation also made supporting adjustments to ensure the 39% rate applies consistently across the personal tax system, including trusts, fringe benefit tax (FBT), and other related areas.
The table below shows the updated PAYE tax brackets and rates applied since the 2021 – 22 tax year.
| Taxable Income Bracket | Tax Owed | Marginal Tax | Max Tax of Bracket | Cumulative Tax |
|---|---|---|---|---|
| $0 – $14,000 | 10.50% of taxable income | 10.5% | $1,470 | $1,470 |
| $14,001 – $48,000 | $1,470 + 17.50% of the amount over $14,000 | 17.5% | $5,950 | $7,420 |
| $48,001 – $70,000 | $7,420 + 30.00% of the amount over $48,000 | 30.0% | $6,600 | $14,020 |
| $70,001 – $180,000 | $14,020 + 33.00% of the amount over $70,000 | 33.0% | $36,300 | $50,320 |
| $180,001 and over | $50,320 + 39.00% of the amount over $180,000 | 39.0% | — | $50,320 + 39% |
2019-21 tax brackets and rates
| Taxable Income Bracket | Tax Owed | Marginal Tax | Max Tax of Bracket | Cumulative Tax |
|---|---|---|---|---|
| $0 – $14,000 | 10.50% of taxable income | 10.5% | $1,470 | $1,470 |
| $14,001 – $48,000 | $1,470 + 17.50% of the amount over $14,000 | 17.5% | $5,950 | $7,420 |
| $48,001 – $70,000 | $7,420 + 30.00% of the amount over $48,000 | 30.0% | $6,600 | $14,020 |
| $70,001 and over | $14,020 + 33.00% of the amount over $70,000 | 33.0% | — | $14,020 + 33% |