Payroll Giving

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payroll

What is it?
Payroll Giving is a scheme that enables employees to give to any UK charity straight from their gross salary (before tax is deducted), and to receive immediate tax relief of up to £4 for every £10 donated. 
It is a tax-effective way for an employee to give a regular or one-off amount direct from their salary (monthly or weekly) to charity. Employees can support one or more charities and they can give as much as they wish. Payroll Giving has become increasingly popular in recent years, but there is potential for further growth. In 2006/07, more than 640,000 employees used Payroll Giving to make donations worth almost £90 million. It is estimated that around 10.5 million employees now have access to Payroll Giving.


What are the benefits?
Payroll Giving provides charities with a regular, reliable income stream, allowing you to plan ahead and budget for the future. Benefiting donors with immediate tax relief, it is easy to set up and donations continue to be deducted from an employee’s pay automatically, often for many years. 
From an employer’s perspective, Payroll Giving is simple and inexpensive to set up and run. Payroll Giving is a great way for businesses, through the Quality Mark scheme, to demonstrate commitment to the causes that their employees care about.


How the tax relief works
Unlike Gift Aid, all the tax relief is given to the donor. The donation is simply a pre-tax deduction, reducing the amount of Income Tax taken from the donor’s pay. This means the donor gets immediate tax relief at their highest rate of tax. So a £10 donation would generate tax relief of £4 for higher rate tax payers and £2 for basic rate tax payers.

Employee donation received by charity

Basic rate taxpayer (20% tax)

Higher rate taxpayer (40% tax)

 

Tax relief

Cost to donor

Tax relief

Cost to donor

£5.00

£1.00

£4.00

£2.00

£3.00

£10.00

£2.00

£8.00

£4.00

£6.00

£20.00

£4.00

£16.00

£8.00

£12.00

£100.00

£20.00

£80.00

£40.00

£60.00

What employers have to do
All organisations, charities and businesses alike, are encouraged to offer Payroll Giving to their staff. Employers simply sign up with an HMRC approved Payroll Giving Agency (PGA) that will distribute donations to the employees’ favoured charities. Donors are asked to complete a mandate, stating how much they wish to give and to which charities and the employer arranges for the donation to come off their salary as a pre-tax deduction. All modern payroll systems can facilitate Payroll Giving. Employers send the deductions in one sum each month alongside a list of donors and new donor mandate forms, if appropriate, to their PGA, usually at the same time as they send the PAYE tax to HMRC.