Can I use P.A.Y.E money to offset my mortgage?

[embreezy]

Hi all,

I'm a contractor and currently using HNRY. My money gets deposited to their accounts, they cut out my tax and student loan etc. And then the leftover money comes into my account. I've heard from people (other contractors) that they keep a revolving credit facility with their bank and get all their money paid to their bank account, use this to offset the amount of interest that they have to pay on their mortgage, and then when the accountant says it's time to pay tax, you just pay it out of the account.

This is a very uneducated understanding from my end, I'm keen to learn more about how this works. Can someone give me a rundown? Thanks

 

[wolste99]

@embreezy Change accountants.

I pay my provisional tax every 3 months. The first 3 installments in a tax year are based on your earnings last year. The last one is a "balance" depending on whether you've earned more or less that year compared to last year.

You have to be better at keeping track of what you owe. I friend got slapped with a tax bill at the end of the year almost $15k more than he was expectes because he had done his sums wrong.

I do use my provisional tax payments to offset my mortgage sont touch them at all, so there is a big saving in terms of interest there.

A friendly/jokey warning though. Ask yourself if you're ready to be very aware how much tax you pay. It didn't used to bother me when paying PAYE because it was gradual, but coughing up $12k in one go every 3 months hurts me to see.

 

[flozfz]

@embreezy This exact scenario was the biggest factor in my decision not to use HNRY. They've a great product offering and I'd like to use it but I'd rather have that money offsetting my mortgage.

 

[shanrose]

@embreezy HNRY is your "accountant" in this case. Their whole selling point is that you pay tax as you earn instead of at the end of the year. So you can't do it, unless you change accountants.

 

[pixey]

@embreezy Yes, this is one of the great perks of being a contractor - you can use GST that you collect and the provisional income tax to offset your mortgage. Probably wouldn't be able to do it with HNRY though, so need to switch to an accountant. This may end up being cheaper too, depending on how much you earn p.a.

 

[deniz]

@pixey This. Hnry charges 1%. Pretty steep compared to an accountant if you earn anythng over 80k p.a.

 

[lytova]

@embreezy Yes you can.

 

[resjudicata]

@embreezy Cancel your Henry. Get an accountant if you need it. I file my own through ird online.
If you have student loan and are gst registered like me - I put 40% of everything I earn in my offset mortgage account and never touch it for anything but income tax, student loan, acc levy, and gst payments. I don’t even look at it as my money (because it isn’t mine) and that’s the key to avoid temptation along with having a good emergency fund so you never need extra money anyway.

 

[kermos]

@embreezy How does this work if you have a recruiter ? Do they cut taxes out like how Henry does.