If you are looking for ways to give back to the community or donate money to causes you care about in the most cost-effective way possible, then payroll giving may be the answer. Payroll Giving is a simple way of allowing PAYE employees to make charitable donations directly from their salaries. Payroll giving is becoming more popular in the UK due to its ease of setup and tax incentives. In this article, we’ll discuss what payroll giving is, how it works, and how it benefits employers, employees and charities.
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What is Payroll Giving?
Payroll giving is where employees donate to charity directly from their salary. The donations are deducted before tax, so they’re effectively given from your pay packet ‘net’ of income tax. It’s a voluntary scheme, and you can choose to give as much or as little as you like to any UK charity registered with HMRC. However, many choose to participate in payroll giving because it is a simple and efficient way to support the causes that matter most to them without the hassle of making one-off payments. Moreover, because the donations are taken before tax, your chosen charity will receive more of your money than if you donated in other ways. It’s a win-win scenario for both parties.
Payroll giving might be more beneficial for high earners. If you’re a higher-rate taxpayer, payroll giving is particularly beneficial as you can claim further tax relief on your donation. Another reason people like payroll giving is that it’s highly flexible—you can change or stop your donation at any time simply by letting your employer know.
How Does Payroll Giving Work?
Payroll giving is a tax-efficient way for employees to donate to charity directly from their salary. The donations are deducted before tax, so they’re not subject to income tax or National Insurance. This means that payroll giving is an effective way to give to charity, as the employee can give more than if they were to donate through other methods.
Charities that are registered with HM Revenue & Customs (HMRC) can receive payroll giving donations. To set up payroll giving, employees must choose an HMRC-approved charity and authorise their employer to deduct the donations from their salary before tax is calculated. The donation amount can be changed at any time.
Payroll giving is a simple and efficient way to give to charity, and it’s an essential source of regular income for many charities. Employees can give as much or as little as they like, and they can change the amount of their donation at any time. Payroll giving is also a convenient way to give, as the donations are deducted from the employee’s salary before tax is calculated.
Benefits of Payroll Giving
There are several benefits of payroll giving for employers, employees and charities:
Less paperwork: Donors can give to any UK-registered charity without having to worry about excessive paperwork or claiming Gift Aid.
Convenient: For employees, donations are simple and convenient—they are taken directly from your salary, so you don’t need to remember to make regular payments.
Flexibility: Payroll giving is very flexible—you can change or stop your donations at any time and choose to donate anonymously if you wish.
Tax-efficient: It costs employees less in tax if they give more to charity through payroll giving.
No set-up costs: A benefit for employers is that there is no payroll giving set-up costs.
Boosts CSR profile: Setting up payroll giving boosts employers’ corporate social responsibility profile, as it shows they are taking steps to help good causes.
Regular income: Charities can benefit from regular, reliable income, which helps them plan and fund long-term, high-impact projects that make a difference.
Tips For Signing Up to a Payroll Giving Scheme
If you’re considering signing up for payroll giving, there are a few things to keep in mind:
- Check with your employer first to see if they offer payroll giving. Please note that there is no statutory obligation for employers to offer a Payroll Giving Scheme to employees. As a result, not all employers offer them. Some payroll giving providers offer ‘employer search’ features on their websites, where you can find out if your employer allows payroll giving.
- There is no minimum amount you can give—you can choose to donate as little or as much as you like each month.
- Your donations will be taken before tax, so you’ll get some tax relief on them. The more you donate, the more relief you’ll get.
- You can change or stop your donations anytime—it’s completely flexible.
Final Thoughts
Payroll giving is a great way to contribute to the causes you care about while also getting tax relief on your donations. Payroll giving schemes benefit employers and employees alike, and they can help everyone involved feel more connected to their causes of choice without having to invest too much time and effort into making one-off donations.
