New Zealand Tax
New Zealand operates a comprehensive taxation regime under which New Zealand Tax Residents are subject to income tax on their worldwide income – in the simplest terms, any money you earn is taxed. New Zealand has a Double Tax Agreement with the UK, so you should not be taxed twice on any UK income.
New Zealand operates a self-assessment system where taxpayers are responsible for completing and filing their own tax returns if required. Employees have tax deducted from their earnings as they are paid by their employers. The tax is paid to the Government under a system known as “pay as you earn” (PAYE).
Taxpayers who derive their income from sources such as businesses, rental or investments pay tax in three instalments during the year with a fourth annual square-up payment. This is referred to as the provisional tax regime.
If you are earning a wage in NZ, you’ll find that approximately the same amount of your income disappears automatically to the tax man as in the UK. The main difference is that there is no personal allowance; but on the up-side, there are no stamp duties, estate duties, or National Insurance contributions – but there is an ACC earners’ levy in New Zealand on salary and wage income which covers the cost of non-work related injuries. This is levied at 1.39% (in the 2021-2022 tax year) of salary and wage income and is taken along with PAYE for employees.
The New Zealand tax year runs from the 1st of April to the 31st of March the following year. The UK tax year runs from the 6th of April to the 5th of April the following year.
The income levels at which income tax is assessed are:
(from 1st April 2021)
- 10.5% on income up to $14,000
- 17.5% on income between $14,001 and $48,000
- 30% on income between $48,001 and $70,000
- 33% on income between $70,001 and $180,00
- 39% on income over $180,001
Individuals including the ACC earners’ levy
(from 1st April 2021)
- up to NZ$14,000, the rate is 11.89%
- between NZ$14,001 and NZ$48,000, the rate is 18.89%
- between NZ$48,001 and NZ$70,000 the rate is 31.39%
- over NZ$70,000 the rate is 34.390%, up to a maximum of $1,785.73.
The company tax rate in New Zealand is 28%.
Income retained by the Trust is subject to the flat rate of 33%. Income distributed to beneficiaries (with 6 months of balance date) is taxed at the rates for the individual beneficiaries (as listed above).
Getting a New Zealand Tax (IRD) Number
If you settle in New Zealand, you’ll need an IRD number. This is a tax identification number, which you’ll need for banking and income. You’ll pay a higher rate of tax if you don’t supply an IRD number to your bank or employer.
Should you require individual tax advice we can thoroughly recommend a number of tax experts in both NZ and UK tax, please get in touch so that I can put you in touch with a local expert.
TOp 10 Tax Tips
1. Let HMRC know that you have left the UK – complete Form P85 before or very soon after leaving the UK. If you are an employee and have left part way through a tax year you may receive a tax repayment. Complete HMRC form for tax relief at source from UK income tax and claim to repayment of UK income tax for New Zealand tax residents – click here
2. Obtain an IRD number as soon as you arrive in New Zealand. This will avoid having to pay tax at higher rates simply because you don’t have an IRD number. Whilst any such overpayment can always be recovered at a later date this may be an unnecessary hassle.
3. Don’t make any hasty decisions – for example it may be more tax efficient to retain UK income producing assets as there is a 4 year temporary exemption from New Zealand tax for most overseas income of new immigrants.
4. If you have UK stocks and shares then consider holding onto these – they can be subject to favourable tax treatment beyond the 4 year temporary exemption.
5. If you are renting out a UK property join the Non-Resident Landlords Scheme (NRLS) – Otherwise any letting agent will be obliged to deduct 20% tax at source. By joining the NRLS you can receive rental income without deduction of tax – but if any UK tax is owing you will need to complete a self-assessment tax return each year.
6. If you are renting out a UK property which is subject to a mortgage then after the 4 year exemption for Transitional Residents you are likely to be subject to tax in New Zealand on the mortgage interest that you are paying.
7. If you have UK personal pensions think twice before making additional contributions after leaving the UK. If you simply continue to contribute to the fund you may run the risk of the fund income becoming taxable in New Zealand.
8. Consider setting up a family trust. New Zealand has a favourable tax regime for family trusts. If you are arriving in New Zealand with substantial assets then you should consider setting up a trust.
9. Don’t rely on advice from the Inland Revenue (either in the UK or New Zealand). In fairness to both HMRC and IRD it is not their job to give advice but they do try to assist taxpayers when they can. When it comes to dealing with tax issues across international borders it wise to seek help from accountants who can advise on both UK and NZ tax.
10. Don’t leave to UK just to escape the Taxman. There’s a Taxman here in New Zealand and the overall tax burden in New Zealand has actually been slightly higher than in the UK in recent years – even though there is no capital gains tax and the top rate of income tax is lower at 39%.
These points are generic points and Henderson Consulting accepts no responsibility or liability to any person acting or refraining from acting on the basis of the information set out here. You should always obtain specific advice based on the full facts and which takes into account both UK and New Zealand tax law.
To find out more, request a free copy of our Financial and Pension guides for New Zealand.