Payroll giving

Payroll giving lets you give to charity straight from your pay, before Income Tax is worked out. Because the donation comes off your taxable pay, the tax relief is immediate: a £10 donation costs a basic-rate taxpayer £8, a higher-rate taxpayer £6 and an additional-rate taxpayer £5.50. Your employer has to run a scheme through an approved payroll giving agency, and many NHS trusts, councils and government departments do.

What a donation costs you

The charity gets the full amount you choose. Your take-home pay falls by less, because you no longer pay Income Tax on the donated money.

Your top rate of Income Tax	Charity receives	Cost to you
Basic rate (20%)	£10.00	£8.00
Higher rate (40%)	£10.00	£6.00
Additional rate (45%)	£10.00	£5.50
Scottish starter rate (19%)	£10.00	£8.10
Scottish intermediate rate (21%)	£10.00	£7.90
Scottish higher rate (42%)	£10.00	£5.80
Scottish advanced rate (45%)	£10.00	£5.50

These figures assume all of the donation is taxed at your top rate. If your pay is below the £12,570 personal allowance, you pay no Income Tax, so payroll giving gives you no relief and the full donation comes out of your pay.

What it does not reduce

Payroll giving reduces Income Tax only. National Insurance is still calculated on your full gross pay, and so is any student loan repayment. That makes it different from salary sacrifice, where you give up part of your gross salary and National Insurance falls too. Salary sacrifice schemes covers the difference.

It also does not change your pension. Public sector pension contributions are based on your pensionable pay, which payroll giving does not touch.

How to sign up

Ask HR, payroll or your intranet whether your employer runs a scheme. If it does, you fill in a form for the payroll giving agency, choosing the charity and the amount per pay period. The deduction appears on your payslip, normally with a label such as “payroll giving” or the agency’s name. Some employers match donations or pay the agency’s admin fee, so check what yours offers.

If your employer does not run a scheme, you can ask it to set one up. Gov.uk lists approved payroll giving agencies, and the arrangements are straightforward for an employer that already runs PAYE.

Payroll giving or Gift Aid

Gift Aid is the other main way to give with tax relief. It works the other way round: you donate from money that has already been taxed, and the charity claims basic-rate tax back from HMRC on top of your gift. If you pay tax at a higher rate, you can claim the difference between the higher rate and basic rate for yourself, usually through a Self Assessment tax return or by asking HMRC to adjust your tax code.

	Payroll giving	Gift Aid
Where the money comes from	Your pay, before tax	Money you have already paid tax on
Who gets the tax relief	You, straight away, at your top rate	The charity at basic rate, plus you for any higher-rate relief you claim
Needs a scheme at work	Yes	No
Needs you to be a taxpayer	Yes, for relief	Yes: you must have paid enough tax to cover what the charity claims
Paperwork	Sign-up form only	A Gift Aid declaration for each charity

For a basic-rate taxpayer the total benefit to the charity is broadly similar either way. Payroll giving suits regular donations to the same charities. Gift Aid suits one-off gifts, sponsorship and donations to more than one cause.

Payroll giving and other thresholds

Donations through payroll giving lower your taxable income, which also lowers your adjusted net income. That can matter if you are near £60,000, where the High Income Child Benefit Charge starts, or near £100,000, where the personal allowance begins to taper away. High Income Child Benefit Charge explains how adjusted net income is worked out.

Your payslip should show the donation before the tax line. If it seems to be coming off after tax, ask payroll to check how it has been set up. How to read your payslip shows where each deduction sits, and the take-home pay calculator will show your pay before donations.