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Payroll giving

  • 2 min read

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. 

Win win, right? 

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. 

How does Payroll Giving work?

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. Here’s what we mean by this:

Salary Tax band Tax rate
£12,571 – £50,270 Basic rate 20%
£50,271 – £125,140 Higher rate 40%
£125,141+ Additional rate 45%

The higher your salary, the lower the cost to your take home pay. 

How do you donate?

The donations are deducted automatically when you’re paid. And for every £1 you give to the charity, it will cost:

  • Basic rate taxpayers – 80p
  • Higher rate taxpayers – 60p 
  • Additional rate taxpayers – 55p

Essentially, the percentage deducted represents the rate of Income Tax that you would usually pay. This makes it a very tax-efficient way of making charitable donations. 

What are the benefits?

  • You can donate flexibly
  • There are no fees for an employer if they choose to set it up themselves
  • It’s a tax-efficient method of donating
  • Employees can make regular donations automatically from their salaries
  • Depending on your salary, it costs less to donate more to your charity
  • It can be set up online

Read more about how it all works online with HMRC.

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