Payroll Giving is a scheme that allows you to make regular, tax-free donations to charities, directly through your salary. You can also donate from your pension payments. It’s essentially a method of reducing your taxable income, by giving to charity.
You can get involved if your employer is part of the scheme and if you’re paid via Pay As You Earn (PAYE). HMRC has a list of recognised charities that you can donate to.
When you donate via Payroll Giving, the donation taken from your salary is deducted from your gross pay after National Insurance, but before you’ve paid Income Tax. It can be used by the charity as an alternative to Gift Aid.
The way it works depends on the size of your salary and, therefore, what tax band you’re in. The higher your salary, the lower the impact on your take home pay!
|£12,571 – £50,270
|£50,271 – £125,140
Your donations are automatically deducted from your salary when you get paid, just like student loan repayments or PAYE income tax. If you are a basic rate taxpayer, you will be able to donate £1 to charity, whilst the real-world impact to your net income will only be 80p. If you pay the additional rate tax, you can donate £1 and the loss to your net income will only be 55p. This accounts for the money that you’d have lost to tax anyway so it’s highly tax-efficient. Everyone’s a winner!
Gift Aid is a tax incentive that allows charities to claim back Income Tax (at the basic rate) on donations made through the scheme. For more information, read our helpful glossary page!
Not at all! Payroll Giving is just a more tax-efficient way of donating to charity via your salary. Instead of withdrawing £10 cash (that you’ve already been taxed on) and giving this to charity, you can give a charity £10 directly from your salary and it’ll only cost you £8 or less!