Net Profit
$95,000.00
Total Tax + ACC
$24,077.50
After-Tax Income
$70,922.50
Sole Trader Tax
As a sole trader, your business profit is taxed as personal income. You can deduct legitimate business expenses including cost of goods, rent, utilities, and professional services.
P&L Structure
Revenue minus Cost of Goods Sold gives your Gross Profit. Subtract operating expenses to arrive at Net Profit, which is your taxable income as a sole trader.
ACC Levies
As a sole trader, you pay ACC earner, work, and working safer levies on your net profit. These are calculated on liable earnings up to $142,283.
IRD-Aligned: Uses 2025-26 NZ tax rates and ACC levy rates.
How tax works when you run your own business as a sole trader
What is a sole trader in New Zealand?
A sole trader is the simplest way to run a business. You and the business are the same legal entity — there is no separate company. You earn the profits directly and pay personal income tax on them. Most tradies, freelancers, and small business owners in NZ start as sole traders because there is no registration fee and very little paperwork to get going.
How is sole trader income taxed?
Your business profit (income minus expenses) is taxed at personal income tax rates: 10.5% up to NZ$14,000, 17.5% from NZ$14,001 to NZ$48,000, 30% from NZ$48,001 to NZ$70,000, 33% from NZ$70,001 to NZ$180,000, and 39% over NZ$180,000. If you also have a job, your sole trader income is added on top of your salary before tax is worked out.
What ACC levies do I pay as a sole trader?
You pay the earner levy (about 1.39% of your earnings) and a work levy that varies by industry. A builder might pay a higher work levy than a graphic designer because the injury risk is higher. Both levies are capped at earnings of NZ$142,283. On NZ$80,000 profit, your total ACC bill would be roughly NZ$1,650.
What expenses can a sole trader deduct?
You can deduct any expense that is needed to run your business. Common deductions include: tools and equipment, vehicle costs (business portion), home office costs, materials and supplies, marketing and advertising, accounting fees, insurance, and training. If you buy a laptop for NZ$2,000 and use it 70% for business, you can claim NZ$1,400.
Do sole traders need to pay provisional tax?
Yes, if your residual income tax (tax to pay after any PAYE credits) is more than NZ$5,000. Most sole traders earning over about NZ$30,000 will need to pay provisional tax. This means paying your tax in instalments during the year — typically three payments. It stops you from having a large tax bill at the end of the year.
When do I need to register for GST?
You must register for GST once your turnover (total sales, not profit) exceeds NZ$60,000 in any 12-month period. Once registered, you add 15% GST to your prices and can claim back GST on your business purchases. A tradesperson charging NZ$500 for a job would invoice NZ$575 including GST.
What tax return does a sole trader file?
Sole traders file an IR3 individual tax return, which includes a section for business income and expenses. The tax year runs from 1 April to 31 March. Your return is due by 7 July, or you can get an extension to 31 March of the following year if you use a tax agent. You can file online through myIR.
What is the main risk of being a sole trader?
As a sole trader, you have unlimited personal liability. If your business runs up debts or gets sued, your personal assets (house, car, savings) are at risk. This is the biggest reason some people choose to set up a limited company instead. A company creates a legal barrier between your business debts and your personal life.
IRD-Aligned: Based on 2025 IRD rates and thresholds. For personal advice, speak to a qualified tax agent.
Disclaimer: This calculator provides estimates based on current HMRC rates and thresholds for the 2025/26 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant or tax adviser before making financial decisions. Read our terms
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