Tips to understand your personal tax code
To start off with – what are tax codes?
Tax codes are different from tax rates. Tax codes are only for individuals. They help your employer work out how much tax to take out of your pay, benefit or pension. You need to work out your tax code for each source of income you receive. In saying this you need to tell your employer or payer what your code is otherwise they will tax you at the higher non-declaration rate of 45%. You would also need to tell your employer or payer if your tax code changes.
We understand this may be confusing, so we can help you break it down so you can start to understand your own tax code.
Your tax code depends on your situation
Your main income
You have one tax code for your main income. The code you use depends on the type and amount of your main income.
Your secondary income
If you have more than one source of income, you need to use a secondary tax code for your other income.
Do you have a student loan?
If you have a student loan you use a tax code that tells your employer to deduct your repayments.
Once you’ve paid off your loan you need to get a new tax code and tell your employer what it is.
Are you getting schedular payments?
Use the WT tax code for income from schedular payments.
Are you a casual agricultural worker?
Use the CAE tax code if you do casual agricultural work.
Casual agricultural workers are people who do casual seasonal work on a day-to-day basis, for up to three months. This includes shearers and shearing shed-hands.
Are you a recognised seasonal worker?
Use the NSW tax code if you’re a recognised seasonal worker, or hold a work visa as a foreign crew member of a vessel fishing New Zealand waters.
Are you helping with election day work?
Use the EDW tax code for income from election day work.
With all this in mind, if you get it incorrect it’s okay! IRD monitors taxes and if they notice that you are using an incorrect tax code, then they will reach out to your payer or your employer to make the change. This is a good thing, because if you’re being incorrectly taxed it runs the risk of you being taxed more than you should, and it also prevents you from paying too little and end up getting surprised with a bill at the end of the tax year. But if you’re still unsure about how to tackle your own tax, have no fear! We offer services to help you.
At Accountants Plus we offer the full range of Taxation Services. We appreciate that taxation can be a major cost to your business, so we will work in partnership with you to help you minimise your tax and achieve your key financial objectives.
Our team has in-depth knowledge of the tax laws, rules and regulations. Our expertise enables us to guide and help our clients make informed business decisions. We have considerable experience and a proven track record in handling people’s taxation needs.
