Payroll Giving (UK) or GAYE
Payroll Giving (sometimes referred to as Give As You Earn (GAYE)) is a way of giving money to charity through your employer pre-tax (but after National Insurance). The amount of tax relief you get depends on the rate of tax you pay but it is particularly cost effective for higher rate taxpayers.
Your employer needs to set up and run the scheme which involves making deductions each time they run payroll. The donation will be taken from employees’ pay before tax but after National Insurance.
The donations are then sent to a Payroll Giving agency who then pass them on to the chosen charities.
- Charities Aid Foundation (CAF)
- Most used provider in the UK
- Charges 4% administration fees on donations (this can be covered by the employer and is a tax deductible cost)
- Can't set up a monthly % of salary (have to work out the amount to donate)
- No impact reporting
- Tyve is an effective giving non-profit that aims to promote workplace giving to effective charities
- Does not charge an admin fee
- Can set up a monthly % of salary
- Limited administration for the employer (they are partnered with Charities Trust which is an HMRC approved payroll giving agent)
- Impact tracking available for donations to Tyve’s recommended charities.
Tax relief
The tax relief you get depends on the rate of tax you pay. To donate £1, you pay:
- 80p if you’re a basic rate taxpayer
- 60p if you’re a higher rate taxpayer
- 55p if you’re an additional rate taxpayer
The tax relief you get is different if you live in Scotland. To donate £1, you pay:
- 81p if you’re a starter rate taxpayer
- 80p if you’re a basic rate taxpayer
- 79p if you’re a intermediate rate taxpayer
- 59p if you’re a higher rate taxpayer
- 54p if you’re a top rate taxpayer
- Overview of UK Income Tax & Donations
Payroll giving vs Gift Aid
Payroll
You earn £60,000 per year (making your marginal tax band 40%). You donate £1,500 through payroll giving. Your take-home pay only reduces by £900. (From £43,849.40 to £42,949.40, assuming no other deductions).
Gift Aid
You earn £60,000 per year (making your marginal tax band 40%). You donate £1,200 to a charity after you've been paid. The charity can claim 25% from the government, giving them £1,500. And you can claim a tax rebate of £300 (1500 * 0.2), meaning you are only out-of-pocket £900.
Comparison
- Both benefit you and the charity the same
- Both reduce your 'income' for the purposes of tax
- With Gift Aid, the charity needs to take the step of actually making the claim from the government for the 25% top up.
- With Gift Aid, you need to go through the step of claiming your tax rebate, including keeping track of how much you have donated throughout the year.