If you're a self-employed tradie — sparky, plumber, builder, or painter — the 2025–26 income tax year brought updated brackets that affect how much you actually keep. Most commentary focused on employees, but the picture is different for sole traders and contractors who pay their own tax. Here's what changed, worked out at real tradie income levels.
What Changed With the NZ Tax Brackets
From 31 July 2024, the government adjusted income tax thresholds for the first time in over a decade. These carry through into the full 2025–26 tax year (1 April 2025 to 31 March 2026):
| Taxable Income | Rate | Previous Lower Threshold |
|---|---|---|
| $0 – $15,600 | 10.5% | $14,000 |
| $15,601 – $53,500 | 17.5% | $48,000 |
| $53,501 – $78,100 | 30% | $70,000 |
| $78,101 – $180,000 | 33% | — |
| $180,001+ | 39% | — |
The key shifts: the 10.5% band now covers income up to $15,600 (up from $14,000), and the 17.5% band now runs to $53,500 (up from $48,000). The 30% rate doesn't kick in until $53,501, whereas before it started at $48,001.
For a self-employed tradie earning typical NZ incomes, this adds up to a real difference — not life-changing, but enough to matter when you're quoting jobs and setting your hourly rate.
Worked Examples at Tradie Income Levels
IRD taxes your net self-employment income — that's after business expenses, not your total invoice revenue. These examples assume you've already deducted vehicle costs, tools, ACC levies, and other legitimate expenses. If you're not sure how to calculate your net income, the IRD tax toolbox for tradies has a useful overview.
Example 1: Plumber netting $58,000
Under the old thresholds, income from $48,001 to $58,000 attracted 30% tax. Under the new thresholds, only income from $53,501 upward pays 30%.
- Tax under old brackets: approx. $13,270
- Tax under new brackets: approx. $12,620
- Saving: ~$650/year
That's $650 that stays in your business — about one day's labour on a standard bathroom job.
Example 2: Builder netting $82,000
The full 17.5% band now extends to $53,500, and the 30% band runs to $78,100 before the 33% rate applies.
- Tax under old brackets: approx. $22,010
- Tax under new brackets: approx. $21,070
- Saving: ~$940/year
For a builder invoicing $120–140k with reasonable expenses, a $940 annual saving is meaningful — roughly one less provisional tax top-up payment over the year.
Example 3: Electrician netting $95,000
A sparky earning above $78,100 net moves into the 33% band on income above that level. The shift in lower thresholds still saves tax on the portion below $78,100.
- Tax under old brackets: approx. $26,620
- Tax under new brackets: approx. $25,560
- Saving: ~$1,060/year
At this income level, the saving is over $1,000 — enough to cover the annual premium on a good tools insurance policy.
The Provisional Tax Angle
For most self-employed tradies, income tax doesn't come out of each invoice like PAYE does for employees. You pay it in advance via provisional tax, usually in three instalments across the year (August, January, May). Your provisional tax is calculated based on the prior year's residual income tax, so the bracket changes flow through with a slight lag.
If your net income grew significantly in 2024–25, your 2025–26 provisional tax instalments may be set too low — and you'll face a catch-up bill plus use-of-money interest from IRD. Use our provisional tax calculator to check whether your current instalments are tracking correctly before the May instalment date.
The standard safe harbour threshold is $5,000 residual income tax. If you owe less than that after all tax credits, you don't pay provisional tax at all — you just pay your end-of-year bill when you file. Many one-person tradie operations with low net income fall into this category.
Are You on the Right Tax Code?
Self-employed tradies don't use tax codes in the same way employees do — you pay through provisional tax instead. But if you have a mix of income (e.g., you work some PAYE shifts and run your own jobs on the side), your tax code on the PAYE portion matters. A common mistake is leaving the tax code at "M" (the standard employee code) when your combined income puts you into a higher bracket. If you earn over $53,500 across all income sources, you may be under-withholding and end up with a surprise bill at year end.
Check the IRD tax codes and rates page if you're unsure which code to use.
How This Affects Your Hourly Rate
Knowing your real tax bill helps you set your hourly rate accurately. Many tradies underprice because they mentally subtract "about 30%" for tax, when their actual effective rate at $60–80k net income is closer to 21–23% under the new brackets.
Our hourly rate calculator lets you plug in your target net income, expected billable hours, and tax rate to find the minimum charge-out rate that keeps your business viable. Getting this right is especially important if you've recently gone fully self-employed and are no longer topping up a PAYE salary.
Business Tools That Help
One practical way to stay on top of your tax position throughout the year is to use job management software that integrates with your accounting system. Fastcrew is a NZ-built tradie app that tracks job costs, invoices, and profit margins — giving you a live view of what you're actually making, which makes your tax estimates far more accurate than guessing at year end.
When your accounting is in order, your tax agent can also work more efficiently — which usually means a lower bill from them too.
Key Dates for 2025–26
- 7 February 2026 — Terminal tax due if you have a 31 March 2025 year-end and no tax agent extension
- 7 April 2026 — Extended terminal tax due if you file through a tax agent
- 7 May 2026 — Third provisional tax instalment (standard balance date taxpayers)
- 7 July 2026 — First provisional tax instalment for the 2026–27 year
If you missed the May instalment, contact IRD or your accountant promptly. Use-of-money interest (currently 10.91% p.a.) accrues from the day after the due date, so the sooner you square up, the less it costs.
Don't Overlook Deductions First
Before worrying too much about the rate you're taxed at, make sure you're claiming everything you're entitled to. IRD allows self-employed tradies to deduct:
- Vehicle expenses (actual costs or kilometre rate)
- Tools and equipment (immediately under the low-value asset rule up to $1,000, or depreciated above that)
- Work clothing with a trade logo
- Mobile phone and internet (work-use portion)
- Training and CPD costs
- Home office, if you do quoting or admin from home
Lowering your net income through legitimate deductions is always more valuable than a small reduction in the tax rate applied to that income.
Download our free NZ tradie templates at tradietools.nz/templates/ — including an income and expenses tracker that makes your end-of-year tax filing straightforward.
NZ Tradie Tools provides free calculators, templates and guides for New Zealand tradies. Visit tradietools.nz.