Chapter 4 - Payroll Giving

4.1 Introduction

4.1.1 Payroll Giving provides tax relief at source for individuals who give to charity by direct deduction from their pay. Pensioners can also use Payroll Giving to give to charity by direct deduction from their occupational pension but, for simplicity, this guidance uses the terms ‘employees’, ‘employers’ and ‘pay’.

4.1.2 Any employee whose pay is subject to PAYE and whose employer has contracted with a Payroll Giving Agency ('Agency') to run an approved scheme can take part.

4.1.3 Once an employee has signed up to the scheme the employer simply deducts the authorised amount from the employee's pay before deducting tax under PAYE and sends the payment to the agency charity. However, an employee’s National Insurance contributions are calculated on the gross amount of pay - pay before Payroll Giving donations are deducted.

There is no statutory limit on the amount of donation an employee can give.

4.1.4 The Agency distributes the employee’s donations in accordance with their instructions and must do so within 60 days of the receipt of the funds from the employer.

4.15 Payroll Giving donations received are exempt from tax in the charity’s hands as long as the donations are used for charitable purposes. If the donations are used for non-charitable purposes they lose their tax exemption.