Payroll Giving
What is Payroll Giving?
Payroll Giving lets donors make regular or one-off donations to charities of
their choice directly from their earnings or company or personal pension.
Donations are made out of income before Income Tax is taken off. This means
that donors are given tax relief on their donation immediately - and at their
highest rate of tax.
How Payroll Giving works
The scheme is managed by HMRC-approved Payroll Giving Agencies (PGAs) -
which are themselves charities - who run it on behalf
of employers and pension
providers.
An employee asks their payroll department to deduct regular charitable
donations from their gross pay (before calculating their PAYE tax payable, but
after National Insurance contributions).
The company then passes that money to
a PGA, which sends the donations to the appropriate charities.
PGAs usually deduct a small administration fee for each donation. Sometimes
the employer pays this on the donor's behalf.
Benefits of Payroll Giving
Payroll Giving is an easy, tax-effective way to give to charity - so it
costs employees less to give more. The system is easy to opt in and out of,
giving donors full control over their giving.
Benefits for charities
- The donations are deducted
from an individual's pay or pension before tax and so it saves you time
and paperwork as you don’t have to reclaim any tax.
- The donation goes straight
from the donor’s pay or pension via the PGA into your bank account.
- It’s a regular source of income
- making it easier for you to budget and plan.
- It’s a way to communicate
with and get to know your donors (although donors can choose to remain
anonymous) - you can build a relationship with them and employers or
pension providers.
Benefits for donors
- Their taxable income is
reduced and they get all of the tax relief - so a donation of £10 costs a
basic rate taxpayer £8 and costs a higher rate taxpayer £6.
- It can be anonymous - the
employee doesn’t have to agree to the charity knowing their name (and
employers don’t know which charity an employee chooses to support).
- Donors don’t have to
remember to give - regular gifts continue to be sent to their chosen
charity for as long as they choose.
- It’s flexible - donors can
give to several different charities.
