Irregular Income Tax Smoothing Calculator NZ 2026

Related: Are you owed a tax refund? A part year, a second job on a secondary code, or the wrong tax code all leave too much PAYE deducted. Work out what IRD owes you.

Rates current for the 2026/27 tax year. Reviewed 5 August 2026.

Quick answer On $105,000 of gross self-employed income with $15,000 of deductible expenses, you owe $21,152.50 in income tax and ACC earner levy for the year. That is 20.15% of everything you receive. Move that share of every payment into a separate account the day it arrives, and you will have the full amount by year end without ever having to find it. To also draw the same amount every month you need a buffer of $2,994.55.
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Self-employment rarely pays evenly. A strong month covers a quiet one, invoices land late, and a single large job can double a quarter. The problem this creates is not that the money is insufficient, it is that the money is not there at the moment the tax bill is. Because income tax in New Zealand is progressive, the share of your income that ends up going to tax is not one of the bracket rates and cannot be guessed. It is your total tax and ACC for the year divided by your total gross income, a ratio that sits between the brackets and rises as you earn more. That ratio is the only number you need day to day: hold back that share of every payment as it arrives and the year takes care of itself. This calculator works it out from twelve months of your own income, then shows the second thing lumpy income demands, which is a buffer. Reserving tax correctly still leaves you with an uneven amount to live on, so the tool calculates the largest cumulative shortfall you would run while paying yourself the same figure each month, and that shortfall is the buffer you need before a steady draw becomes possible. Enter your real figures rather than an average, because the shape of the year is what determines the buffer.

Hold back from every payment
20.15%
of gross income received
Total owed for the year
$21,152.50
Income tax, ACC and student loan
Buffer for a steady draw
$2,994.55
Separate from your tax reserve

How the reserve is worked out

Gross income received$105,000.00
Less deductible expenses$15,000.00
Taxable profit$90,000.00
Income tax on profit$19,577.50
ACC earner levy (1.75% of profit)$1,575.00
ACC CoverPlus invoice$0.00
Student loan$0.00
Total to reserve$21,152.50
As a share of gross income20.15%
Effective rate on profit23.50%
Steady monthly draw this allows$6,987.29

Month by month

Reserve is what leaves each payment for tax. Available is what remains. Running balance is what you would have left after drawing $6,987.29 every month, and its lowest point is the buffer you need.

MonthReceivedReserveAvailableRunning balance
This is an estimate, not tax advice. It covers income tax and the ACC earner levy on business profit. It does not model GST, provisional tax instalment dates, the ACC work levy (which varies by classification unit), or any income taxed at source. Your actual liability depends on your circumstances. Confirm your position with Inland Revenue or your accountant.

Why a flat percentage works when the tax rates are not flat

New Zealand taxes income in bands, so the rate applying to your last dollar is higher than the rate applying to your first. That leads people to assume no single percentage can be right, and to either reserve at their top bracket rate, which sets aside far too much, or at a remembered rule of thumb, which usually sets aside too little. Both miss the same point. Your total tax for the year is a single number, and dividing it by your total income gives one ratio. Applying that ratio to every payment as it arrives accumulates to exactly the total by the end of the year, whatever order the payments came in. The maths does not care whether you earned $18,000 in one month or $1,500 in each of twelve.

The estimate is the risk, not the method

What can go wrong is the projection. The ratio is calculated from an expected annual income, and if you finish the year well above it, the percentage you were reserving was too low all year. The gap is not proportional either: crossing into a higher bracket means the extra income is taxed at the higher rate, so a 20 percent overshoot in income produces more than a 20 percent overshoot in tax. If your year is running ahead of plan, re-run this with the revised figure rather than waiting for the return.

Worked example

Take the default figures. Twelve months of contracting bring in $12,000, $4,000, $15,000, $6,000, $3,000, $18,000, $9,000, $5,000, $14,000, $7,000, $4,000 and $8,000, a total of $105,000. Deductible expenses for the year are $15,000, so taxable profit is $90,000. Income tax on $90,000 is $19,577.50: 10.5% on the first $15,600, then 17.5% to $53,500, 30% to $78,100, and 33% on the remaining $11,900. The ACC earner levy adds 1.75% of profit, which is $1,575.00. Total owed is $21,152.50. Against $105,000 of gross income that is 20.15%, so $20.15 of every $100 received goes straight into the tax account. The $18,000 month contributes $3,626.14 to the reserve and the $3,000 month contributes $604.36, and neither requires a decision.

What is left after reserving is $83,847.50 across the year, or $6,987.29 a month if drawn evenly. The uneven months mean the running balance dips, and it dips furthest at the end of month five, by $2,994.55. That is the buffer: with it, the year pays a steady wage; without it, month five is an overdraft.

How this is calculated

Gross income is the sum of the twelve monthly figures. Taxable profit is gross income less deductible expenses. Income tax is calculated on profit using the personal rates in force from 1 April 2025: 10.5% to $15,600, 17.5% to $53,500, 30% to $78,100, 33% to $180,000, and 39% above that. The ACC earner levy is 1.75% of profit, capped at the maximum liable earnings of $156,641. Any ACC CoverPlus invoice and student loan repayment you enter are added as given. The reserve percentage is total owed divided by gross income. The running balance applies the reserve percentage to each month's receipts, subtracts an equal monthly draw, and accumulates; the buffer is the most negative point that balance reaches.

Related NZ calculators

Data sources: the rates and thresholds on this page are maintained against Inland Revenue and ACC. Figures are checked twice monthly.

Frequently asked questions

What percentage should I put aside for tax when self-employed in New Zealand?

There is no single correct percentage, because income tax in New Zealand is progressive. The rate that matters is your total tax and ACC for the year divided by your total gross income, and that ratio rises as you earn more. On the default figures in this calculator, $105,000 of gross income with $15,000 of expenses produces a reserve of about 20 percent of everything received. Someone on half that income would reserve noticeably less, and someone well into the 33 percent bracket noticeably more. Work it out from your own numbers rather than using a rule of thumb, because a rule of thumb is wrong for almost everyone.

Why does holding back a fixed percentage work when tax is progressive?

Because the percentage is calculated from the whole year, not from each payment. Progressive rates mean the tax on your last dollar is higher than on your first, but the total is a single number, and dividing that total by your total income gives one ratio that holds every payment to its fair share. Reserving a flat percentage of each payment therefore reaches exactly the right amount by the end of the year. The risk is not the method, it is the estimate: if you earn much more than you projected, the ratio you have been using is too low.

Is tax charged on what I receive or on my profit?

On your profit, which is your gross income less your deductible business expenses. This is why the reserve percentage is expressed against gross income rather than profit: the money arriving in your account is gross, so a percentage of gross is what you can actually apply as each payment lands. The calculator works out the tax on profit and then converts it back to a share of gross so you have one number to use.

What is the buffer figure and why do I need one?

The buffer is the largest cumulative shortfall you run during the year if you pay yourself the same amount every month. Lumpy income means some months bring in less than your steady draw, and the buffer is what covers those months until a strong month refills it. It is separate from your tax reserve and must not be taken from it. On the default figures the shortfall peaks in the fifth month, which is the point at which a run of quiet months has drained the surplus built earlier.

Does this replace provisional tax planning?

No. This tool tells you how much to set aside and when you will have it. Provisional tax governs when Inland Revenue expects that money to be paid, which is usually in instalments through the year rather than in one lump at the end. Reserving the right amount and paying it at the right time are two separate problems, and being right about the first does not protect you from being late on the second.