Most people who owe IRD do not need to panic. IRD is actually one of the better creditors to owe money to, as long as you talk to them. Here is how to think about prioritising debt when you cannot pay everyone at once.
The TACA debt priority order
- PAYE you have already deducted from staff (this is not your money, it is theirs)
- Credit cards, overdrafts, BNPL, anything at 18% plus
- Provisional tax and GST you owe to IRD
- Term loans, mortgages, hire purchase
Why this order? The cost of carrying high-interest debt outweighs the cost of IRD interest on a payment arrangement. PAYE is special because it was always staff money, not yours; pay it first or you risk serious consequences from IRD.
Why IRD is not as scary as it feels
IRD use-of-money interest is reset periodically, based on the Reserve Bank's floating first-mortgage rate plus 2.5%. From 16 January 2026 it dropped to 8.97% on underpaid tax (down from 10.96% the year before). That is comfortably less than most credit cards.
IRD offers instalment arrangements you can apply for online in myIR. Most get approved. They will usually remit late payment penalties (not the tax itself) if you set up an arrangement before the due date. They will not show up at your door. They will write, they will phone, they will charge interest. The worst outcomes are for people who go silent, not people who get into a payment plan.
How to set up an arrangement
- Log into myIR
- Pick the period you owe for
- Pick "Request an instalment arrangement"
- Suggest an amount and frequency you can sustain (be honest, not optimistic)
- Stick to it. Missing one payment voids the arrangement and IRD goes back to recovery mode.
What you should not do
- Ignore the letters
- Pay the credit card off first and IRD second, then realise the IRD interest has compounded harder than expected
- Try to negotiate the tax debt itself down. IRD has no incentive to reduce the principal. They will reduce penalties if you ask, never the tax.
- Move the debt to a personal loan without doing the maths. Sometimes it helps. Often the personal loan rate is worse than IRD.
When to call us
Before the due date passes is the strongest position. We can apply for the arrangement on your behalf, prepare a cashflow forecast that supports a longer instalment period, and talk you through what happens if it gets worse.
If the due date has passed, still call. Penalties keep compounding. The earlier we act, the more we can recover for you.