What Is Provisional Tax?
Provisional tax is how self-employed NZ tradies pay income tax throughout the year in three instalments, rather than one lump sum at the end.
You must pay provisional tax if your Residual Income Tax (RIT) for the prior year was $5,000 or more. RIT = total income tax − PAYE already deducted − tax credits.
The Three Methods
Standard method (most common) — pay 105% of last year's RIT in three equal instalments. Safe if income is similar to prior year.
Estimation method — estimate this year's income and pay that instead. If you underestimate, IRD charges use-of-money interest (UOMI) at 10.91% p.a.
Ratio method — for GST-registered businesses with taxable supplies under $5M; provisional tax is a percentage of your GST returns.
2025–26 Instalment Dates
| Instalment | Due Date |
|---|---|
| 1st | 28 August 2025 |
| 2nd | 15 January 2026 |
| 3rd | 7 May 2026 |
Safe Harbour
If prior year RIT was under $5,000, no provisional tax is required — your full tax bill is due 7 February 2027.
See the IRD Tax Toolbox for further guidance. If you're unsure which method suits you best, talk to your accountant before the first instalment date.