Tax Code M
Tax code M applies to your highest-earning job when you have no student loan and are not claiming the independent earner tax credit. It is not a flat rate: PAYE runs through the progressive bands, from 10.5% up to 39%, plus the 1.75% ACC earners' levy.
What M actually withholds
Every rate you see quoted for M is really two rates added together. The income tax component comes from whichever band the next dollar of your income falls into; the ACC earners' levy of 1.75% sits on top of all of them, on earnings up to $156,641 a year. At the two bands most New Zealand salaries sit in, the arithmetic looks like this:
Those are marginal rates. What the next dollar costs, not what your whole salary costs. Because the lower bands are taxed at the lower rates first, someone earning $78,100 on M pays an effective PAYE rate of 21.8%, not 31.75%. Above $156,641 the levy stops entirely, which makes the combined rate fall before it rises again - the full combined PAYE rate table sets that out band by band.
The codes either side of this one
| Code | Who it is for | Rate |
|---|---|---|
| Mthis page | Main income, no student loan | Progressive |
| ME | Same, but claiming the $520 independent earner tax credit | Progressive − $520 |
| M SL | Same, but with a student loan being repaid | Progressive + 12% |
Every New Zealand tax code, in one table: all tax codes and rates.
Who M is for
M is chosen on two facts about your whole year, not about this employer:
- This is your highest-earning source of income. Not the job you have held longest, and not the one with the most hours - the one paying the most across the year. If you have a second job, a taxable pension or ACC weekly compensation, compare them and give M to the largest.
- Adding up everything you earn, you are outside the independent earner tax credit. Either your total income is below $24,000 or above $70,000, or you receive one of the payments that rule the credit out. Inside that range and outside those payments, the code is ME, not M.
Everything else about your circumstances. Hourly or salaried, permanent or fixed-term, full-time or twelve hours a week, makes no difference to whether M is correct.
Your pay on tax code M
- Gross
- $70,000.00
- PAYE tax
- − $13,220.50
- ACC levy
- − $1,225.00
- KiwiSaver
- − $2,450.00
- Take-home
- $53,104.50
You keep 75.9% of your gross pay.
PAYE here is income tax plus the 1.75% ACC earners' levy, calculated the way a pay run does it. Annualise the period, apply the bands, then truncate. KiwiSaver is shown at the 3.5% default; change your rate and the figure moves with it.
Example 1. $1,250.00 a week on M
- 1.Gross pay for the week$65,000 a year$1,250.00
- 2.PAYE: income tax plus the ACC earners' levy− $247.26
- 3.KiwiSaver at 3.5%− $43.75
- Into your account$958.99
Example 2. $7,200.00 a month on M
- 1.Gross pay for the month$86,400 a year$7,200.00
- 2.PAYE: income tax plus the ACC earners' levy− $1,658.45
- 3.KiwiSaver at 3.5%− $252.00
- Into your account$5,289.55
Both examples assume the default KiwiSaver rate and no student loan. The second sits in the 33% band on part of its income - which is why its PAYE is proportionally heavier than the first even though the code is identical.
M is the wrong code for you if…
- You have a student loan being repaid. The code is M SL. Leaving the suffix off does not cancel the debt, it just means nothing is collected until Inland Revenue notices.
- Your total income is $24,000 to $70,000 with no Working for Families, main benefit, NZ Super or Veteran's Pension. You are giving up $10.00 a week of cash flow by not using ME.
- This is not your highest-earning job. It needs a secondary tax chosen on your total income, SB, S, SH, ST or SA.
- You invoice for the work rather than being on payroll. Schedular payments use WT, where you elect your own withholding rate.
- No standard code withholds anything close to correct. Very uneven income across the year is what the special tax code (STC) exists for. Inland Revenue sets a rate for your situation.
What happens at the end-of-year square-up
After 31 March, Inland Revenue adds up what you actually earned, works out the tax genuinely due, and compares it with what your employers withheld. For a steady salary on M the two match almost exactly, that is the whole point of the code. The gaps come from the way PAYE handles a pay period.
Each payday, payroll annualises: it multiplies your gross for that period out to a full year, taxes that figure, then divides back down. A week in which you earned more than usual is therefore taxed as though you would earn at that rate for all 52 weeks. Across a year of identical paydays this is exact. Across an uneven one it systematically over-withholds.
A concrete case: 10 weeks of work at $1,000.00 a week and nothing else for the year. Each of those weeks is taxed as if the year were $52,000, so $1,715.00 of PAYE comes out. The tax actually due on $10,000 of annual income is $1,225.00. Inland Revenue refunds the difference. About $490.00, once the year closes. Nothing went wrong; M did exactly what it is designed to do, and the square-up is what corrects it.
The same mechanism runs the other way if you were on M at two jobs at once, or stayed on M after your income moved out of the independent earner band. Except then the letter after 31 March asks you for money instead.
Common questions
What does tax code M mean in New Zealand?
M is the code for your main. Highest-earning, source of income, when you have no student loan and are not claiming the independent earner tax credit. It tells payroll to run your pay through the progressive tax bands plus the 1.75% ACC earners' levy, rather than at a single flat rate.
What percentage is tax code M?
It does not have one. M applies the progressive scale - 10.5% on the first $15,600, then 17.5%, 30%, 33% and 39% on the slices above each threshold. Plus the 1.75% ACC earners' levy. Your effective rate is always well below your top band.
Can I use tax code M on two jobs?
No. M belongs to one job only. Using it twice means each employer gives you the low bands as though the other job did not exist, so you are under-taxed all year and get a bill after 31 March. Every job after your main one needs a secondary tax.
Should I be on M or ME?
ME if your total income is between $24,000 and $70,000 and you do not receive Working for Families, a main benefit, NZ Super or a Veteran's Pension. On M you can still get the $520 credit. Just as a lump at year end rather than $10.00 a week.
Why did I get a tax refund when I was on M all year?
Because PAYE annualises every pay period. A week where you earned more than usual is taxed as though you would earn at that rate for all 52 weeks. Work part of a year, take unpaid leave, or have variable hours, and more comes out than the year actually required, so Inland Revenue refunds it after 31 March.
Is M the same as M SL?
Almost. M SL is M with the student loan suffix, which adds a separate 12% deduction on earnings above $24,128 a year. The PAYE calculation is identical. More on the SL suffix.
Where these figures come from
2026–27 tax year (1 April 2026 – 31 March 2027). Last verified 30 July 2026.
Related
- New Zealand tax codesEvery code and rate in one table
- tax code MEM plus the $520 independent earner tax credit
- the student loan suffixWhat the student loan suffix adds
- New Zealand tax bracketsThe bands M runs your income through
- New Zealand PAYE tax ratesIncome tax and the ACC levy as one combined rate
- how to read a New Zealand payslipWhere M appears, and what sits under it