Tax Code
A code that tells your employer how much tax to deduct from your pay. Most people are on 'M' for their main income. A second job takes one of the S codes. Wrong code, surprise tax bill.
Your tax code tells your employer which PAYE rate to apply to your salary. The most common codes are:
- M, your main or only job
- ME, your main job, when you also qualify for the Independent Earner Tax Credit
- M SL, main job, with a student loan
- S, SH, ST or SA, a second job, the letter set by your total income across every job
- CAE, casual agricultural worker
M is the main-job code at any income. ME is not a higher band of M: it is the same code for people the Independent Earner Tax Credit applies to, and the income range for that credit has moved more than once, so check the current one on ird.govt.nz. If you have a side job, that second employer uses one of the S codes so enough tax comes out.
Getting your tax code wrong is one of the most common causes of unexpected tax bills in New Zealand.
Why this matters
If you've recently started a second job, freelancing, or contracting alongside your main job, check your tax code immediately. Using 'M' on both jobs means neither employer is deducting enough tax, and you'll get an unpleasant bill from IRD at the end of the year. It's a simple fix but one that catches many people out.
More Tax terms
RWT (Resident Withholding Tax)
Tax automatically deducted from your bank interest and dividends. Your bank withholds it before you see the money. Rate depends on your income (10.5% to 39%). Check your rate is correct with IRD.
PAYE (Pay As You Earn)
Income tax deducted from your salary by your employer each pay period. Most NZ employees don't need to file a tax return because PAYE handles it.
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