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Payroll Giving explained

Payroll Giving donations


You might have heard that you can donate to charity with a scheme called Payroll Giving, but what does this actually mean? Charity Choice explain how it works.


What is Payroll Giving?

Payroll Giving is a scheme run by the government, which lets people make regular, tax-free charity donations through their workplace. How it works is that the charity donation is taken out of your wage BEFORE tax is applied, so essentially you can give more to charity without it costing you anything extra. For most tax payers, this means a donation of £1 would only cost you 80p, for a higher rate tax payer it would be only 60p.


How is Payroll Giving different to Gift Aid?

Usually, when you make a direct charity donation, you can tick a box that allows the charity to apply for Gift Aid. They can then claim back the tax from the government that you have already paid on the amount. So for a standard £10 donation, the cost to you is still £10, but the charity receives £12.80 after Gift Aid. With a Payroll Giving donation, the amount that would usually be taxed still goes to the charity, but because the scheme is set up through your employer, the charity itself does not have the added administration of claiming back the Gift Aid. For higher rate taxpayers it also the only way to pass on their 40-45% tax to charities, as Gift Aid is set at 25%.


Who can use Payroll Giving for charity donations?

Any UK tax payer can use Payroll Giving if they are paid a weekly or monthly wage through PAYE, or if a pension holder has tax deducted by their provider through PAYE. Your workplace or pension provider also needs to run a Payroll Giving Scheme. If they don't have one yet, it is worth asking if they will soon be setting one up - they can find out more from HMRC.


Can you choose the charity you want the donation to go to?

Yes, you can make your own charity choice, and you don't have to tell your employers which charity it is.


How do I get started with Payroll Giving?

To start making Payroll Giving donations, ask your employer or pension provider to deduct the amount of your choice from your regular income. You will then need to fill in a form for the Payroll Giving Agency your company uses, specifying which charity you want to support, and whether or not you wish to remain anonymous. After this, your workplace can pass on your regular donations to the agency, which then gives the money to your charity choice.


Find out more about the Payroll Giving Scheme on the HMRC website.


Find out more about Gift Aid with our easy guide.