NZ secondary tax codes — S, SH, ST, SB explained

By the TaxAccountants.co.nz editorial team · Published 2026-06-06

Secondary tax codes apply to any PAYE income source other than your main job. The four codes — SB, S, SH and ST — apply a flat marginal rate to the secondary income based on your expected total income from all sources. The choice is mechanical, but the consequences for cashflow are not.

When secondary tax applies

A secondary tax code is used by the employer (or payer) of any PAYE income source that is not your main job. If you have one employer, your code is M (or ME, with the independent earner tax credit). The moment a second PAYE stream starts — a part-time job, a directors’ fee processed through payroll, a regular schedular contract — the second payer applies a secondary code. The primary employer’s payroll is not affected. Source: IRD — managing my tax.

The four codes and their bands

Each secondary code is chosen by your expected total income from all PAYE sources, not by the size of the individual stream. SB applies when total income is up to $15,600 — the lowest band. S covers $15,601 to $53,500. SH covers $53,501 to $78,100. ST covers $78,101 to $180,000. A fifth code (SA) applies above $180,000 at the top marginal rate. Each code applies the corresponding marginal rate as a flat rate to every dollar of the secondary income. Source: IRD — tax rates for individuals.

How M differs from the secondary codes

The M code on your main employment runs the progressive bracket calculation across the year — first dollar at the lowest rate, then steps up. A secondary code does not run the bracket calculation; it applies one flat rate to every dollar of the second income. The logic is that the first income is "using up" the lower brackets, so the second income falls entirely at the marginal rate of where total income sits.

Why secondary codes can over- or under-withhold

Secondary codes assume a fixed marginal rate, but actual income is fluid. If your expected total income puts you in the SH band ($53,501–$78,100) and so the secondary employer applies the SH rate, but your real total income falls into the S band ($15,601–$53,500), you have over-withheld and will receive a refund at the year-end assessment. The reverse case — coded S but earning into the SH band — leaves you with under-withholding and a terminal-tax bill. Source: IRD — tax rates for individuals.

When a tailored tax code makes sense

A tailored tax code is requested from IRD when the standard codes will materially over- or under-withhold — typically when secondary income is large relative to primary, when you have multiple PAYE streams, or when you have deductible expenses or losses that the flat-rate code does not see. IRD issues a certificate with a custom rate which the employer keys into payroll, valid for the income year. Source: IRD — managing my tax.

Related on TaxAccountants.co.nz

• NZ income tax rates 2026 — the bracket structure behind the four codes.
• PAYE calculator — per-payday PAYE across all NZ tax codes.
• Income tax calculator — annual tax across all PAYE sources combined.
• KiwiSaver employer contribution rate — the parallel deduction that interacts with secondary income.