Leaving PAYE Mid-Year Tax 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 Leaving an $80,000 salary after 5 months and making $35,000 of self-employed profit for the rest of the year leaves $5,938.21 owing to Inland Revenue, plus a separate ACC invoice of $889.00. Had you earned nothing after leaving you would have had a refund of $2,040.96. The refund turns into a bill once self-employed profit passes $11,662.58, and at this level of profit you become a provisional taxpayer for the following year.
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The year you stop being an employee and start working for yourself is the strangest tax year you will ever have, and it goes wrong in a specific way. PAYE is deducted as though your salary will run for twelve months, so leaving after five means too much tax has come out of the salary and a refund is sitting there waiting. Almost nobody receives it. What happens instead is that the self-employed income earned after leaving stacks on top of the salary, filling the brackets the salary never reached, with nothing deducted from it at all, and the refund is swallowed before it ever appears. Two further things surprise people. The first is that Inland Revenue's square-up is only part of the bill: ACC invoices the levies on self-employed income separately, from a different agency on a different timetable. The second is the provisional tax test, which looks at your tax after the PAYE credit rather than at your total liability, and therefore catches fewer mid-year leavers than expected but hits the ones it does catch hard. This calculator does all three.

Owing to Inland Revenue
$5,938.21
terminal tax for the year
ACC invoice, billed separately
$889.00
earner plus work levy on your profit
Provisional tax next year
$6,235.12
at the standard 5% uplift

The Inland Revenue square-up

Salary actually earned while on PAYE$33,333.33
Income tax deducted through PAYE$6,782.29
ACC earner levy deducted through PAYE$583.33
Self-employed profit$35,000.00
Total taxable income for the year$68,333.33
Income tax on that total$12,720.50
Less income tax already deducted$6,782.29
Residual income tax$5,938.21
Refund you would have had with no self-employment$2,040.96
Self-employed profit at which the refund runs out$11,662.58

What happens the following year

Are you a provisional taxpayer next year?Yes, residual income tax is above $5,000
Provisional tax, standard option at a 5% uplift$6,235.12
Instalments3
Each instalment$2,078.37
Tax payable across the twelve months after you file$12,173.33

The ACC invoice, which is not part of the above

Earner levy on self-employed profit, at 1.75%$612.50
Work and Working Safer levy$276.50
ACC invoice$889.00
Everything you have to find in total$6,827.21

Where the refund turns into a bill

The same salary and the same five months, with different amounts of self-employed profit. Your own figure is highlighted.

Self-employed profitTotal incomeIncome taxRefund or billProvisional taxpayer?
This is an estimate, not tax advice. It assumes a level salary paid evenly over the months you were employed, a 31 March balance date, and that PAYE was deducted on the correct tax code with no other income. Student loan repayments, Working for Families, KiwiSaver, the independent earner tax credit, redundancy or holiday pay on termination, and any ACC minimum liable earnings threshold are not modelled. The early payment discount available in your first year of business is not applied here. Confirm your position with Inland Revenue or your accountant.

Why the refund is real and why you will not see it

PAYE does not know the future. Every pay period is taxed as one twelfth or one twenty-sixth of a full year at your current rate, which is the only sensible way to run a deduction system, and it is exactly right for someone who works the whole year at one salary. Stop after five months and the assumption breaks in your favour: your income used the 10.5 and 17.5 percent bands only partly, but tax was deducted as though the 30 percent band had been reached and stayed there. The overpayment is genuine and Inland Revenue will refund it. The reason so few people ever receive it is that the same tax return reporting the overpayment also reports the self-employed income, and one nets off against the other before anything is paid out.

Two bills, two agencies, two dates

The most common cashflow error in this year is budgeting for the Inland Revenue figure and being caught by the ACC one. As an employee, the earner levy was deducted with your tax and appeared nowhere you would notice. As a self-employed person you get an invoice from ACC covering the earner levy plus the work levy and Working Safer levy your employer used to pay, at a rate that depends on what you do for a living and can differ by more than tenfold between occupations. It does not arrive with your tax assessment, it is not paid to Inland Revenue, and it is not reduced by any refund. Treat it as a separate obligation from the day you start.

Worked example

Someone on an $80,000 salary leaves after 5 months, having earned $33,333.33 with $6,782.29 of income tax deducted. They then make $35,000 of self-employed profit, giving total income for the year of $68,333.33. Income tax on that is $12,720.50, and after crediting the PAYE already deducted the residual income tax is $5,938.21. That is what they owe.

Had they earned nothing after leaving, the same PAYE would have produced a refund of $2,040.96. The turning point is $11,662.58 of self-employed profit: below it there is money coming back, above it there is money to find. Because their residual income tax is above $5,000 they also become a provisional taxpayer, owing $6,235.12 across 3 instalments the following year. Adding the terminal tax to those instalments, the twelve months after filing carry $12,173.33 of tax, on top of an ACC invoice of $889.00.

How this is calculated

Salary earned is the annual rate multiplied by the months on PAYE over twelve, and the income tax deducted is the full year tax on that salary apportioned the same way, which is what a level PAYE deduction produces. Total taxable income adds the self-employed profit, and income tax is calculated on the combined figure using the 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. Residual income tax is that liability less the PAYE credit, and if it exceeds $5,000 the provisional tax test is met, giving instalments next year at the previous year's residual income tax plus 5 percent, split three ways. The ACC figures apply the 1.75% earner levy and the work levy rate you enter to the self-employed profit only, capped at the maximum liable earnings of $156,641, and are reported separately because ACC bills them separately. The break-even profit is found by solving for the point at which residual income tax is zero.

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

Why do I get a refund if I leave a job part way through the year?

Because PAYE is deducted on the assumption that your current pay rate continues for the whole year. Each pay period is taxed as one slice of an annual salary, so the higher brackets are applied throughout. If you stop earning after five months you have only used part of your lower brackets, and the tax deducted is more than the tax actually due on what you earned. That overpayment comes back at the end of the tax year. The refund is not a bonus; it is the correction of an assumption that turned out to be wrong.

Will my self-employed income wipe out that refund?

Usually, and often more than wipe it out. Self-employed profit stacks on top of the salary you already earned, so it fills the brackets your salary did not reach and is taxed at whatever rate applies after the salary. Because no tax has been deducted from it at all, the whole liability on that profit falls due at once. This calculator shows the exact profit figure at which your refund becomes a bill, which for most people is a smaller number than they expect.

What is residual income tax and why does it matter?

Residual income tax is your income tax for the year after subtracting tax credits, including the PAYE already deducted from your salary, but before any provisional tax you have paid. It matters because it is the figure the provisional tax test is applied to: if it is more than $5,000 for a year, you are a provisional taxpayer for the next one. Someone who spent most of the year on PAYE often has a large tax liability but a small residual income tax, because the PAYE credit absorbs most of it, and that is why the test catches fewer mid-year leavers than people assume.

Is ACC included in my tax bill?

No, and confusing the two is a common cashflow mistake. While you were on PAYE the ACC earner levy came out with your tax and you never saw it separately. Once you are self-employed, ACC invoices you directly for the earner levy plus the work levy and Working Safer levy that an employer used to pay. That invoice arrives from ACC, not Inland Revenue, on its own timetable, and it is not part of the square-up shown here. This calculator reports it separately for that reason.

When is the tax actually due?

For a standard 31 March balance date, terminal tax is due on 7 February following the end of the tax year, or 7 April if you are linked to a tax agent with an extension of time. That is a long gap after the income was earned, which is exactly why the money is usually gone by the time the bill arrives. If the year also makes you a provisional taxpayer, the following year brings instalments on top of that terminal tax, so the twelve months after you file can carry close to two years of tax.