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IR3 Question 35 Early payment discount

An early payment discount is available for people who:

  • are new in business

  • haven’t begun to pay provisional tax

  • made payments within the corresponding income year up to their balance date, for example, a standard balance date taxpayer, who has made a payment or payments on or before 31 March 2019 as income tax for the period 1 April 2019 to 31 March 2020.

The discount is calculated at the rate of 6.7% of either:

  • the amount paid during the year, or

  • 105% of your end-of-year residual income tax liability,

whichever is the lesser, and is credited against your end-of-year tax bill.

To check if you qualify, work through the flowchart below.

Do you qualify for an early payment discount?

Terms Inland Revenue use:

Provisional taxThis is tax paid in instalments during the year, based on what you expect your income to be, or what it was last year.
Assessable incomeIncome that is not exempt income or excluded income (for example, a government grant to a business). Assessable income includes undeclared business income you may have earned (for example, cash jobs).
YearAs referred to in the diagram on the next page, year means the standard tax year from 1 April to 31 March, unless you have an approved different balance date, in which case your income year will end then.

If you have any questions about your entitlement to the discount, please contact Inland Revenue.





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