Payroll Giving lets donors make regular or one-off donations to charities of their choice directly from their earnings or company or personal pension.
Donations are made out of income before Income Tax is taken off, unlike Gift Aid donations. This means that donors are given tax relief on their donation immediately – and at their highest rate of tax. Charities do not make any repayment claims on Payroll Giving donations.
The scheme is managed by Payroll Giving Agencies (PGAs) – which are themselves charities and approved by HMRC as PGAs – who run it on behalf of employers and pension providers.
An employee asks their payroll department to deduct regular charitable donations from their gross pay (before calculating their PAYE tax payable, but after National Insurance contributions). The employer then passes that money to a PGA, which sends the donations to the appropriate charities.
PGAs usually deduct a small administration fee for each donation. Sometimes the employer pays this on the donor’s behalf.