How to Set Up as a Sole Trader in NZ: The Tradie's Guide

Starting your own tradie business is one of the best decisions you can make. No boss, set your own hours, keep what you earn. But there are a few legal and admin boxes to tick before you start quoting jobs.

This guide walks you through the setup in the right order.

Step 1: Register as Self-Employed with IRD

The first thing to do is tell Inland Revenue you're self-employed. Visit ird.govt.nz and register for an IRD number (if you don't already have one — most NZ residents do) and notify IRD that you're self-employed.

You'll pay income tax on your profit each year. If you earn over $20,000 in your first year, you'll likely be put on provisional tax — paying tax in instalments during the year rather than all at once.

Step 2: Register for GST (If Required)

If your turnover (total invoices, not profit) is expected to exceed $60,000 in a 12-month period, you must register for GST.

If you're under $60,000, registration is optional. However, many tradies register voluntarily from day one because: - You can claim GST back on tools, materials, and expenses (saving 15%) - Larger clients and businesses expect GST-registered suppliers - It looks more professional

Register at ird.govt.nz/gst. You'll choose a filing frequency: - Monthly — for businesses with over $500k turnover or that want regular refunds - Two-monthly — most common for small tradies - Six-monthly — for very small businesses

Step 3: Register for ACC

ACC (Accident Compensation Corporation) covers you if you're injured — even if you're self-employed. Unlike PAYE employees, you're not automatically covered; you need to ensure your details are registered.

ACC will contact you after you file your first income tax return. You'll pay: - Earners' levy — ~1.39% of your liable earnings - Work levy — based on your industry risk classification

You can also buy additional ACC cover (CoverPlus Extra) which lets you lock in a specific income level to cover if you're off work injured.

Step 4: Choose Your Business Name

You can trade under your own name (e.g. "John Smith Plumbing") or register a trading name. A trading name doesn't require company registration — just tell IRD and use it consistently.

If you want a company (Ltd) structure, register at the Companies Office. A company costs $115 to register and provides some liability protection — useful once you're established, but not necessary when starting.

Should You Be a Sole Trader or Company?

Sole trader (most people start here): - Simple to set up (no registration fee) - You are the business — all profits are your income - You're personally liable for business debts - Tax: income tax on profits

Company (consider once you're earning well): - Separate legal entity - Limited liability protection - More complex admin (annual returns, director duties) - Tax: company tax rate (28% flat), then dividend tax when you pay yourself

For most starting tradies, sole trader is the right choice. Get advice from an accountant before setting up a company.

Step 5: Open a Dedicated Business Bank Account

This is not legally required as a sole trader, but strongly recommended. Mixing business and personal finances is the number one reason tradies end up with GST and tax nightmares.

Open a separate account and run all business income and expenses through it. Most NZ banks offer free small business accounts for sole traders.

Recommended NZ banks for tradies: - ANZ Business Current — free transactions, decent online banking - ASB Business — popular with small businesses - BNZ Business — good mobile app

Step 6: Get the Right Insurance

As a self-employed tradie, you're exposed to risks that your employer used to cover. You need:

Public Liability Insurance

Protects you if you damage a client's property or someone is injured because of your work. Essential — most clients will ask for your certificate. $5–$20/month for most sole trader tradies.

Tools and Equipment Insurance

Covers theft or damage to your tools. A full set of trade tools can be $10,000–$50,000+. Very worth insuring. $30–$100/month depending on value.

Income Protection / Illness Insurance

ACC covers work injuries but not illness. If you get sick and can't work for 3 months, you need savings or income protection insurance to cover yourself.

Professional Indemnity

Required for designers, engineers, and LBPs doing complex work. Covers claims that your advice or design caused loss.

Step 7: Set Up Your Admin Tools

Don't let admin eat your evenings. Set up:

1. Accounting software — Xero (recommended) or MYOB. Connect your bank account on day one.

2. Job management software — Tradify for sole traders (simple, affordable), Fergus if you plan to grow.

3. Invoice template — at minimum a proper tax invoice with GST shown separately. Better yet, use Xero or Tradify to generate these automatically.

4. Receipt management — photograph every receipt with your phone and store in Xero. IRD accepts digital records.

Step 8: Set Your Rates

Before your first job, know what you're charging. Use the Hourly Rate Calculator to work out what you need to charge to hit your income target after overhead and tax.

Research your local market — ask around, look at what competitors charge, check trade directory listings. Don't underprice yourself trying to win work — it's the fastest way to go broke.

Step 9: Get Clients

• Word of mouth — the best source. Do great work, ask satisfied clients to refer you.
• Trade directories — Builderscrack, NoCowboys, ServiceSeeking
• Google Business Profile — free, helps you appear in local search
• Facebook business page — useful for residential clients
• A simple website — even a one-page site helps legitimacy

Key Numbers to Remember (2025–26)

Use our free NZ GST Calculator and Hourly Rate Calculator to get started.

About NZ Tradie Tools: Practical setup guides and free tools for New Zealand tradies.