NZ Use of Money Interest: How the IRD Charges It
17 October 2026 · Guide · Not tax advice
Educational information only. Not tax, legal or financial advice. We are not Inland Revenue (IRD) or ACC and are not affiliated with them. Check ird.govt.nz, or ask a qualified tax agent. Sources read October 17, 2026. Anything marked expected should be re-checked. Examples use made-up numbers. This page contains no affiliate links.
Short answer: If you underpay tax, the IRD charges interest, often called use of money interest (UOMI); if you overpay, it pays you interest. The IRD's table shows 8.97% charged and 2.25% paid from 16 January 2026. Interest is calculated daily, doesn't compound and isn't included when penalties are calculated. The rate follows legislated formulas and changes over time.
Which taxes
The list includes GST, income tax, PAYE deductions, fringe benefit tax, KiwiSaver contributions, student loan deductions by employers, Working for Families Tax Credits and other revenue types. The IRD doesn't apply interest to amounts under $100.
When it starts and stops
- Underpayment: interest starts the day after the original due date and stops the day the overdue balance (including interest) is paid in full.
- Overpayment: it generally starts on the latest of the day after the original due date or the day after payment; if you must file a return to get a refund, it starts on the latest of the original due date, the day after the payment, or the date you filed.
- Interest usually stops the day the overpayment is refunded or transferred.
Tax treatment
- Interest the IRD pays you is gross income (in the year it was refunded), even if used to pay other tax.
- Interest you pay on underpayments is deductible for business purposes.
Practical points (IRD)
- Payments clear unpaid interest first, then tax, except provisional tax payments, which go to instalments as you direct.
- After a notice of assessment or statement, you have up to 30 extra days; pay in that time and you don't pay the interest added between the notice and your payment.
- Interest can be remitted in limited cases, for example when IRD advice directly led to non-compliance (see SPS 18/04).
Rate history (IRD table, excerpt)
16 January 2026: 8.97% / 2.25%; 8 May 2025: 9.89% / 3.27%; 16 January 2025: 10.88% / 4.30%.
Made-up example
$3,650 unpaid for 10 days at 8.97% a year is about $9 ($3,650 x 8.97% x 10/365), before any penalties. We didn't verify the IRD's rounding.
FAQ
Is it the same as a late payment penalty? No: penalties are separate (see late payment penalties).
Are there special rules for GST and provisional tax? The IRD page says yes but we did not read those pages (provisional tax).
What we could not verify
- The next rate change after 16 January 2026 (the table read shows no later row; future rates are unknown).
- The special UOMI rules for GST refunds and provisional tax (linked pages not read).
- SPS 18/04 conditions for remission (not read).
- IRD rounding of daily interest.
Sources (official)
- IRD, Interest on overpayments and underpayments (UOMI) — official page (read in full October 17, 2026; page shows no review date)