Giving money from your salary or occupational pension Payroll Giving
What is payroll giving?
Payroll Giving is a scheme that allows employees or people receiving occupational pension through PAYE to give regular gifts to UK charities directly from their earnings or pension before tax is worked out. The scheme is administered by a Payroll Giving agency with the assistance of your employer or occupational pension provider.
Advantages for the charity
- Your chosen charity or charities can receive your donation directly into their bank account before tax has been deducted so will not need to make a repayment claim (saving time and paperwork).
- Regular giving makes it easier for the charity to budget and plan.
Advantages for you
- It costs you less to give - you will pay less tax (at your highest rate) because the amount on which tax is worked out will be reduced. See the example below.
- Confidentiality - your employer won’t know which charity you choose to support and if you prefer you can have your gift passed on anonymously.
- Peace of mind - you don’t have to remember to give, regular gifts continue to be sent to your chosen charity for as long as you choose.
- Choice - You can cancel your payroll giving mandate at any time.
- Flexibility – you can give to several different charities.
- Some Payroll Giving agencies can supply you with a charity card or cheque book so that you can vary the charities you give to.
Example
If you pledge to give £25 per month to charity it will only cost you £20.00 if you pay basic rate tax or £15 if you pay a higher rate tax.
Basic rate taxpayer - tax due (20 per cent)
- Tax due on taxable earnings of £1000 (after personal allowances, NIC etc) - £200
- Tax due on taxable earnings after pledge (£1000 - £25) = £975 - £195.00
- Tax saved £5.00
Therefore:
- Pledged £25
- Less tax saved £5.00
- Cost to you £20.00
Higher rate taxpayer tax due (40 per cent)
- Tax due on taxable earnings of £1000 (after personal allowances, NIC etc) - £400
- Tax due on taxable earnings after pledge (£1000 - £25) = £975 - £390
- Tax saved £10
Therefore:
- Pledged £25
- Less tax saved £10
- Cost to you £15
The charity always gets £25.
Other points to consider
- Once deducted from your salary/pension your gift cannot be returned, even if your charity has closed. In these circumstances the Payroll Giving agency will always pass your gift on to another charity supporting a similar cause.
- Some Payroll Giving agencies may make a small administrative charge (within set limits) for gifts made via Payroll Giving.
How to donate through Payroll Giving
Ask your employer or pension provider whether they operate a Payroll Giving scheme.
If they do you’ll need to complete a mandate form (for the Payroll Giving agency) giving details of:
- how much you want to give
- how often you want to give
- which charity(ies) you want to support.
The Payroll Giving agency then simply tells your employer/pension provider how much to deduct each month
You can cancel your mandate at any time but you must give the Payroll Giving agency notice in writing.
Do I need to report donations made through Payroll Giving?
You don’t need to put details of gifts made through Payroll Giving on your Self Assessment Return or Tax Credit application because the figure of taxable earnings/pension (from your form P60) on which your tax/ tax credits are worked out won’t include the income used to make these payments.
If your employer or Occupational pension provider doesn’t operate Payroll Giving
If your employer or pension provider doesn’t operate a scheme you could ask if they would be willing to start one. More information is available on the Payroll Giving – Why Run Payroll Giving? page.
You or your employer can discuss the options by telephoning the HMRC Charities helpline on Tel 08453 02 02 03 open from 8.30 am to 5.00 pm Monday to Friday and asking to speak to someone about Payroll Giving.
