Another year, another budget – and we’ve spent the afternoon elbow-deep in the details so you don’t have to.
According to the current government, Budget 2026 is a responsible, bread-and-butter affair, rather than a policy “lolly scramble”. The honest read for sole traders is that there isn’t much in there directly aimed at you. Instead, there are broad measures that’ll impact the whole country, and a few more targeted bits and pieces that might apply, depending on your circumstance.
So what’s the lowdown? Let’s get fiscal.
Policies that still apply from 2025 – a quick recap
Before we get into it, we do want to mention two things from previous budgets that still apply – one genuinely helpful for sole traders, and one not so much:
- Investment Boost, a 20% immediate deduction on new business assets, is still available. It’s aimed at helping businesses ride out cost of living pressures. Read more here.
- The halved government contribution for KiwiSaver hasn’t changed. Full disclosure: We’re not fans.
📖 For previous budget coverage, specifically for sole traders, check out our Resources page.
Budget 2026 at a glance
The headline priorities are health, defence, infrastructure, and law and order.
There’s $5.5 billion in additional frontline health funding, a major boost to defence capability, billions for infrastructure (including a new Road of National Significance from Cambridge to Piarere and rail network upgrades), and more money for police, courts, and corrections.
There’s also a fuel response package – temporary, targeted support in case of further fuel price pressure from the Middle East conflict. This includes:
- A $50/week temporary increase to the In-Work Tax Credit (we’ll come back to this – it’s the one that’s relevant to some sole traders)
- $150 million to expand strategic fuel reserves
- A 30% temporary mileage rate increase for home and community support workers (generally not including sole traders)
- A $450 million contingency held in reserve for further fuel-related measures if needed
Before we get too excited though, we should clarify:
The strategic fuel reserves boost is about national resilience – making sure NZ has more fuel stockpiled in case of supply disruption. It doesn’t necessarily mean cheaper petrol at the pump. If anything, buying up reserves adds short-term demand.
📖 Are you eligible for petrol tax refunds? If you use petrol-powered tools, machinery, or equipment, or operate vehicles off public roads, you could be! Learn more.
The mileage rate increase for support workers is specifically for contracted home and community support workers – typically employees of healthcare providers, not self-employed sole traders. If you’re a sole trader using your vehicle for business, you’re already on IRD's per-kilometre rates, which are actually higher than the rate these workers are being lifted to. (Their unions have been pointing this out for a while now.)
Right. Now to the bits that might actually affect you.
Budget measures that could apply to sole traders
Ministry funding cuts
This is the change most likely to directly affect sole traders.
The government is cutting around 8,700 core public service jobs by mid-2029, with departmental operating budgets being trimmed by 2% next year, then 5% in each of the two years after. Multiple agencies will be merged over the next three to five years. The aim is to save $2.4 billion over the forecast period.
If you’re a sole trader who contracts or consults in government ministries, this could go a couple of ways.
On the one hand, smaller agency budgets typically mean fewer briefs going out to external contractors and consultants. Less work, more competition for what’s there.
On the other hand, there’s a well-known pattern where reducing permanent headcount actually increases contractor spend, because the work doesn’t disappear – it just gets done by someone else. The government has signalled it wants to reduce contractor spend too, but how that plays out in reality is anyone’s guess.
In-Work Tax Credit increase
The In-Work Tax Credit is going up by $50 a week temporarily, for up to a year, to help low-to-middle income working families with rising fuel costs. Around 157,000 families are expected to benefit.
If you’re a sole trader with kids and your income falls in the eligible range, you may already be receiving the In-Work Tax Credit (we mentioned this in our 2024 Budget article). The $50/week boost happens automatically if you’re eligible – you don’t need to do anything to apply.
FIF changes for overseas investments
The Foreign Investment Fund (FIF) rules are how IRD taxes you on overseas investments. They’re notoriously fiddly, partly because under the standard method, you can end up paying tax on “deemed” returns that you haven’t actually received in cash. Two changes are coming:
- The de minimis threshold is doubling from $50,000 to $100,000. If your total overseas investments are less than this threshold, you’re exempt from FIF rules entirely
- You’ll only be taxed on income from shares you actually receive. Introduced last Budget for recent migrants holding unlisted shares, it’s now being extended to all NZ taxpayers. If you’re above the threshold, you’ll be taxed on dividends you actually receive, plus 70% of any realised capital gains at your marginal rate.
Accommodation Supplement increase
If you’re a sole trader renting privately and receiving the Accommodation Supplement, the maximum weekly payment is going up by between $10 and $30 a week, depending on which Accommodation Supplement Area you live in.
Income-Related Rent threshold increase
If you’re in social housing (Kāinga Ora or a community housing provider), your minimum rent contribution is being lifted from 25% to 30% of your income, phased in over 12 months from 1 April 2027.
About 84,000 households are affected, with an average rent increase of around $31 a week. The savings from this change are being redirected to the Accommodation Supplement increase above.
If you’re a sole trader currently living in social housing, this means more of your income going to rent. The government is framing it as bringing social housing rents closer to (but still below) what low-income private renters pay.
Temporary Additional Support reductions
Temporary Additional Support (TAS) is a hardship payment for people whose essential costs can’t be met from other income. It’s used by some sole traders who hit rough patches.
Two changes:
- The maximum TAS rate is being reduced from 30% to 25% of main benefit rates. This is expected to take around $10.82 a week off about 45,000 households.
- From 1 April 2027, child support liability is being removed as an allowable cost for TAS – so people paying child support won’t be able to factor that into their hardship calculation.
If you’re currently relying on TAS or might in future, this is worth knowing about.
Fees-free final year of tertiary study scrapped
The scheme that covered the cost of your final year of tertiary study is being scrapped.
If you’re a sole trader who side-hustles to support yourself through study (go you!), or a recent graduate planning to come back for postgrad — this one stings. Students completing their studies this year are still eligible, but anyone after that misses out.
IRD compliance funding increased
Last but not least, IRD is getting $60 million over the next four years for tax compliance and collection activities, on top of the boost in last year’s Budget. The government’s previous compliance investment has reportedly recovered about $3 billion in overdue tax in the year to date, so they’re clearly committed to that approach.
Practical translation: there could be more audit activity, more chasing on overdue payments, and tighter scrutiny generally. You may want to keep your records tidy, stay on top of your tax obligations, and don’t let things slide.
(Or, you know, join Hnry and we’ll handle it all for you. Just saying.)
About Hnry
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Basically, we make earning self-employed income easy by taking care of all your tax admin. Join Hnry today, and never think about tax again!