{"id":1795,"date":"2023-04-17T10:33:35","date_gmt":"2023-04-16T22:33:35","guid":{"rendered":"https:\/\/marketingwebsite.afirmo.com\/nz\/?p=1795"},"modified":"2024-08-04T13:59:18","modified_gmt":"2024-08-04T01:59:18","slug":"paying-tax-in-your-first-year-of-self-employment","status":"publish","type":"post","link":"https:\/\/www.afirmo.com\/nz\/resources\/paying-tax-in-your-first-year-of-self-employment\/","title":{"rendered":"Paying tax in your first year of self-employment"},"content":{"rendered":"

If you also earn PAYE<\/a> income from an employer, you still have to look after the taxes, levies and payments related to your self-employed income. <\/span><\/p>\n

GST<\/h3>\n

If you think your turnover has been more than $60,000 in the last 12-months or is likely to be more than $60,000 in the next 12 months then you have to register for GST. Otherwise you can voluntarily register for GST<\/a>. If you are registered, you have to charge GST to your customers, claim GST on purchases, file GST returns and make GST payments to Inland Revenue for each GST period. <\/span>More about GST.<\/span><\/a> <\/span><\/p>\n

It\u2019s important to get advice from a small business platform like <\/span>Afirmo<\/span><\/a> or an accountant to make sure you\u2019re set up correctly for your situation, and you know what payments will be due and when. In the meantime, this article is designed to help you get started on understanding how income tax typically works in the first year of business.<\/span><\/p>\n

When is income tax due during your first year of business?<\/h3>\n

After your first tax year, which usually ends on 31 March, you complete a tax return and send it to Inland Revenue by 7 July. If you asked a tax agent (accountant or Afirmo) to do it for you, they may be allowed to send it in later than that. <\/span><\/p>\n

A tax return is a summary of all the information needed to calculate how much tax you have to pay. But you don\u2019t have to pay that first tax bill until 7 February the following calendar year. That\u2019s almost 11 months after your first tax year ended and seven months after the due date for filing your tax return. If you used a tax agent or Afirmo it\u2019s due even later – by 7 April.<\/span><\/p>\n

This sometimes leads people to say you don\u2019t pay tax in your first year. While that\u2019s true, it doesn\u2019t mean your first year isn\u2019t taxed. It is, you just pay it in the following year. You also pay the whole first year\u2019s tax in one lump sum. Another option is to make voluntary payments during your first year, which might mean you get an early payment discount of about two %.<\/span><\/p>\n

Both payment options require some careful budgeting to make sure you\u2019ve set enough money aside. To do that, you need to start your first year with a pretty good idea of how much tax you\u2019ll have to pay. That way you can put roughly the right amount aside each time you get paid or at the end of each month.<\/span><\/p>\n

How to calculate income tax when you start your own business<\/h3>\n

When you work for yourself you pay income tax on your profit, which is your income from selling goods or services (turnover) minus the expenses involved in earning that income. To work out your taxable income and therefore how much tax you\u2019ll have to pay, you need to know what your tax-deductible expenses are.<\/span><\/p>\n

What are tax-deductible expenses?<\/h3>\n

Most of the expenses involved in earning self-employed income or running a business are tax-deductible. Here are some examples:<\/span><\/p>\n