Payroll: What Employers Need to Know

Giving to charities via payroll deduction can save you money on income tax. In fact, it can even help you earn some extra cash.

If you are eligible to make charitable donations to registered UK charities, you could receive a tax rebate. This is because your employer matches your contribution, so long as you donate £20 or more per month.

The government says people can claim a match on their next salary payment. You must sign up to payroll giving within 28 days of starting work. If you don’t do this, you won’t qualify for the match.

You’ll need to ask your employer about how much they will match your donation. They might say anything from 0% to 100%. But once you know what percentage they’re matching, you can calculate your total tax savings.

For example, if your employer matches 50%, your total tax savings will be £10.50.

Employees

A lot of people think that charities are just for rich people. But there are plenty of ways to give to charity without having to dip into your savings. Here are some ideas for how you can help out while still keeping up with your bills.

1. Give cash

If you’re looking for something quick and easy, donating money directly to a charity is probably the best way to go. You can donate via text, online, or even over the phone – it doesn’t matter where you make the donation because the charity gets paid regardless.

2. Get match funding

Many employers will match donations that employees make to certain charities. This could mean that every dollar you donate counts towards a bigger total. If you’re eligible for match funding, check with your HR department to find out whether your employer offers anything like this.

3. Give goods

You might already know someone who needs clothes, food, household items, or whatever else. Why not buy those things and hand them over to a charity instead? For example, AmazonSmile lets you choose a charity to support and then shop for everything you need. When you purchase your items, Amazon will donate 0.5% of each sale to the chosen charity.

Basic rate taxpayers

The basic rate tax threshold is set at £43,000. This means that people earning up to this amount do not pay any income tax. However, anyone earning more than this amount must pay the higher rate of income tax. In 2018/19, this is 40% of earnings above £43,000.

Higher rate tax payer

If you are a higher rate taxpayer, you might want to consider donating through Payroll giving. This way, charities can claim back taxes at the higher rate. However, charities cannot reclaim tax at the same rate through Gift Aid.

Donating through Payroll Giving allows charities to claim back the full amount of the donation. In contrast, charities can only claim back 25% of the money donated through Gift Aid.

Payroll Giving is more efficient because it saves charities time and resources. Instead of having to go through complicated processes to claim back the difference, charities just need to send out one form.

The charity must still file a return with HMRC, but this process takes less time and fewer resources.

Frequently Asked Questions

What your paycheck donation will do for us

Every day, we help hundreds of families across the UK find safe, secure homes. But it takes money to do this job well. And without funding, our projects cannot grow – meaning more people are stuck in temporary accommodation, sleeping rough or living in overcrowded conditions.

We know how important it is for everyone to feel valued and appreciated. So whether you want to say thank you for someone’s hard work, show appreciation for something special they’ve done or just keep up with what’s happening in the lives of those we support, there are lots of ways you can contribute.

You can set up a regular monthly donation, or choose one-off gifts such as a birthday present or Christmas hamper. You could even use your workplace benefits scheme to cover the cost of a gift – the choice is yours.

What if I retire or change jobs?

If your employer is registered with one of the PGA agencies, you can still make donations through your salary. However, if you change jobs or retire, you can set yourself up with a direct debit to receive a replacement donation. You can choose either to use your previous employer’s payroll deduction account or set up a new direct debit with a different organisation.

The Direct Debit option is free, whereas the payroll deduction option costs £3 per month. If you opt for the latter, it will be deducted from your pay each week.