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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.
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 – £150,000||Higher rate||40%|
The higher your salary, the lower the cost to your take home pay.
The donations are deducted automatically when you’re paid. And for every £1 you give to the charity, it will cost:
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.
Read more about how it all works online with HMRC.