Payroll Giving is a scheme run through HMRC which allows employees to make simple, tax-effective donations to any UK charity or good cause. Employees can give to any organisation recognised as charitable by HMRC.
As a charity, Payroll Giving provides an unrestricted source of regular income for your cause, and when you receive donations through Payroll Giving there is no need to apply for Gift Aid, saving you money and time. As opposed to Gift Aid where donations can only be increased by 25% regardless of the donor’s tax bracket, Payroll Giving allows charities to receive the full tax relief. This is particularly beneficial for donations from higher rate tax-payers.
For a donor, the advantages of making a donation to charity through Payroll Giving are:
- charities get more of your donation because giving comes out of your salary before tax (after National Insurance). This means that you get tax relief on your donation which can be passed onto your charity.
- charities can rely upon regular donations.
- reduces administration for charities because donations are made before tax, charities don’t have to claim gift aid.
Employers who pay employees or pensioners through PAYE, set up a Payroll Giving scheme through a Payroll Giving agency, using the list of organisations approved and monitored by HMRC to set up a scheme. Deductions are made each time payroll is run by the employer, with the donation taken from employees’ pay before tax (but after National Insurance). The donations are then sent to the Payroll Giving agency who pass them on to the chosen charities. Some agencies charge an administration fee, although the employee can opt for the fee to be deducted from their donation.
As an employer, most corporate organisations realise how important Corporate Social Responsibility is, both for their reputation as a responsible business and a good employer. By having a payroll giving scheme, businesses can offer a genuine employee benefit and boost their CSR at the same time. Choosing a charity for the whole organisation to support each year can also be a great employee engagement activity, with additional fundraising events from time to time building team spirit and pride in the organisation.
And finally the good news from HMRC is that employers can deduct any costs of running the scheme from their business profits before tax.
Details on the HMRC website