Is a percentage fee or a fixed fee cheaper for a sole trader?

It depends entirely on your income, and the crossover is easy to find. A percentage fee costs more as you earn more, while a fixed fee does not move, so there is always one income at which they cost the same. Below it the percentage is cheaper; above it the fixed fee is. On the default figures, 1 percent against a $2,000 fixed quote crosses at $200,000 of income. If the percentage fee carries an annual cap, the comparison changes again above the cap, because the percentage stops growing.

How does an annual cap change the comparison?

A cap turns a percentage fee into a fixed fee above a certain income. Once the cap binds, the fee stops rising no matter how much more you earn, so the effective rate falls continuously. That means a capped percentage fee can be cheaper than a fixed fee at low incomes and cheaper again at very high ones, while being more expensive only in the middle. The calculator shows where the cap starts to bind so you can see which part of the curve you sit on.

Does GST registration change what the fee costs me?

Yes. If you are GST registered you claim the GST on the fee back, so the real cost is the GST-exclusive amount. If you are not registered, and most people under the $60,000 turnover threshold are not, the GST is a genuine cost and the fee is effectively 15 percent more than the headline. This is a real difference that the advertised price never shows, and it matters most to the smallest operators.

Is an accounting fee tax deductible in New Zealand?

Fees for managing your business tax affairs are ordinarily deductible as a business expense, which means the real cost is lower than the invoice. The saving is the fee multiplied by your marginal tax rate, so someone in the 33 percent band recovers a third of it through a reduced tax bill. This calculator shows the after-tax cost of both options, because comparing headline prices when both are deductible overstates the gap between them.

Should I just pick whichever is cheaper?

Only if the two options genuinely do the same work. A percentage fee that includes tax payments, filing, expense management and support is not comparable to a fixed fee covering an annual return alone, and the difference in scope usually matters more than the difference in price. Use this to establish the cost gap, then decide whether what the more expensive option adds is worth that gap to you.

Percentage Fee vs Fixed Fee Calculator NZ 2026

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

Quick answer At $100,000 of self-employed income, a 1% fee capped at $1,500 costs $1,000.00 a year against a fixed quote of $2,000.00. The percentage option is $1,000.00 cheaper. The fixed fee would become the cheaper option at no income, because the cap holds the percentage fee below it forever. The cap starts to bind at $150,000.

Accounting for a sole trader is sold two ways. A traditional firm quotes a fixed annual fee for a defined piece of work, usually the return and some advice. A percentage service charges a share of what you earn, often with an annual cap, and typically bundles tax payments, filing and expense handling into the same price. Comparing them by headline number is close to meaningless, because one moves with your income and the other does not, so which is cheaper depends entirely on what you earn. There is always exactly one income at which they cost the same, and knowing where that point sits relative to your own earnings answers the question immediately. Two further things change the real cost and are almost never shown on a price page. If you are GST registered you reclaim the GST, so the advertised percentage is the true cost; if you are below the registration threshold you cannot, and the fee is effectively 15 percent higher than advertised. Both fees are also ordinarily deductible, so a third of the cost comes back through a lower tax bill for anyone in the 33 percent band. This calculator handles all four effects, on whatever numbers you enter.

Self-employed income for the year What the percentage is charged on

Percentage fee Excluding GST

Annual cap on the percentage fee Enter 0 for no cap

Fixed annual fee quoted Excluding GST

Are you GST registered? Registered means you claim the GST on the fee back

Your marginal tax rate Both fees are deductible, so this reduces the real cost

Cheaper at your income
Percentage
by $1,000.00 a year

Fixed fee becomes cheaper at

Never

at any income, with this cap

Effective rate you pay

1.00%

of income, on the percentage option

What each option actually costs

Percentage fee before GST$1,000.00

Fixed fee before GST$2,000.00

GST treatmentClaimed back, no cost

Percentage fee, real cost before tax$1,000.00

Fixed fee, real cost before tax$2,000.00

Deduction saves (at 33%)$330.00

Percentage fee after tax$670.00

Fixed fee after tax$1,340.00

Difference after tax$670.00

Cap starts to bind at$150,000

How the two compare across incomes

Costs before tax. The percentage option rises with income until the cap binds, after which it is flat and its effective rate falls.

Income	Percentage fee	Effective rate	Fixed fee	Cheaper

This compares price, not value. A percentage service and a fixed-fee accountant often cover very different scopes of work. Check what each includes before treating the cheaper one as the better one. Deductibility of professional fees depends on your circumstances; confirm with Inland Revenue or your accountant.

Why the crossover is the only number that matters

A fixed fee divided by a percentage rate gives the income at which the two are equal. At 1 percent against a $2,000 fee that is $200,000, and the arithmetic is that simple whenever there is no cap. Below that income the percentage costs less, above it more. It is worth calculating rather than assuming, because people consistently misjudge it: 1 percent sounds small and $2,000 sounds large, so the fixed fee feels expensive at every income when in fact it is the cheaper option for anyone earning above the crossover.

What a cap does to the curve

A cap stops the percentage growing, which changes the shape of the comparison entirely. Below the cap the percentage behaves normally. At the cap it becomes a fixed fee, and from there its effective rate falls continuously as income rises: a $1,500 cap is 1 percent at $150,000, 0.75 percent at $200,000 and 0.5 percent at $300,000. The consequence is that a capped percentage fee can beat a fixed fee at both ends of the income range while losing in the middle, so a single crossover point is no longer the whole story and the table above is worth reading.

Worked example

A GST-registered sole trader earns $100,000 and is comparing a 1% service capped at $1,500 against a fixed quote of $2,000. The percentage fee is $1,000.00, well below the cap, so the percentage option is $1,000.00 cheaper before tax. Because they are registered, the GST on both fees is reclaimed and neither headline changes. Both fees are deductible, and at a 33% marginal rate the deduction returns $330.00 of the percentage fee and $660.00 of the fixed one, so after tax they cost $670.00 and $1,340.00. The gap narrows to $670.00, because a deduction shrinks the larger cost by more.

Without the cap the two would cross at $200,000 of income, but the cap binds first at $150,000. Above that point the percentage fee never exceeds $1,500, so it stays cheaper than the $2,000 quote at every income above the cap as well. With these particular numbers the fixed fee never wins, which is exactly the sort of conclusion a headline comparison hides.

How this is calculated

The percentage fee is your income multiplied by the rate, limited to the cap if one is entered. If you are not GST registered, both fees are increased by 15 percent because the GST cannot be reclaimed. The deduction saving is each fee multiplied by your marginal tax rate, and the after-tax cost is the fee less that saving. The break-even income is the fixed fee divided by the percentage rate, which is the income at which the two are equal; if a cap is in force and the capped fee never reaches the fixed fee, no crossover exists and the table shows the percentage option winning throughout. The cap binding point is the cap divided by the percentage rate.

Related NZ calculators

Irregular Income Tax Smoothing Calculator for what to reserve from lumpy income
Salary Plus Self-Employed Tax Calculator if you also have a job
Self-Employed Take-Home Calculator for what you keep after tax and ACC
GST Registration Threshold Calculator for whether you should be registered
Hourly Rate Calculator for the rate that covers costs like these