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Setting Up a Tax Effective Payroll Giving Scheme

By: Garry Crystal - Updated: 16 Sep 2012 | comments*Discuss
Payroll Giving Employees Charities

Payroll Giving is a way for employees to give to their favourite charities through their employer’s payroll scheme. There are specific advantages for employers, employees and charities when donating through Payroll Giving.

Donating to Charities through Business Payroll

Payroll Giving is an excellent way to donate to charities directly from the employee’s salary. Once set up, Payroll Giving will take the nominated charitable donation from the employee’s salary. Employees can donate as much as they want through the Payroll Giving scheme as long as they pay tax through Pay as Your Earn (PAYE). The Payroll Giving scheme is also open to people who have a personal pension plan or a company pension through Pay as You Earn. Charitable donations will be required to be passed on from employers to a Payroll Giving organisation.

Tax Advantages of Payroll Giving

There are significant tax free advantages when using a Payroll Giving scheme. The charitable deductions are taken from the employee’s salary before tax from the gross salary. Tax relief is given on donations; it will only cost employees £0.80 to give £1.00 to charity. It will only cost higher tax payers £0.60 to give £1.00 to their nominated charity. Charities will receive donations on a regular basis through Payroll Giving, allowing them to efficiently plan their future budgets. Employees are able to decide at any stage whether or not they would like to keep contributing to the Payroll Giving scheme.

Setting up a Payroll Giving for Businesses

A Payroll Giving Scheme is very simply to set up and will not disrupt the present payroll system. Employees will simply need to request that charitable donations are deducted from their salary by completing an application form. The application form will include details on how much the employee wishes to donate and the charities they wish to donate to. Payroll staff will find the process very easy to implement and it is usually set up by simply ticking a Payroll Giving box option. The donations will then be deducted before tax is taken but after National Insurance contributions are deducted.

Business Advantages of a Payroll Giving Scheme

Payroll Giving can create stronger relations between employers and employees, especially if employers are also donating. Payroll Giving can be an excellent addition to businesses that do run fundraising activities. There are also some Payroll Giving agencies that provide awards to employers who actively encourage employees to sign up for Payroll Giving donations. This can be an excellent addition to any business fundraising campaign and is good publicity for any business.

How to Find Payroll Giving Agencies

Payroll Giving agencies are charitable organisations.There are number of Payroll Giving agencies throughout the UK. These agencies can be found on the internet with full details of the scheme available through their websites. The HM Revenue and Customs (HMRC) do approve Payroll Giving agencies and a full list of approved agencies can be found on the HM Revenue and Customs websites. There are no tax forms to complete when setting up a Payroll Giving scheme through a payroll system.

Reasons to Use Payroll Giving Schemes

Payroll Giving is one of the easiest methods for employees to donate to their favourite charities. Advantages include:

  • Tax free benefits when donating through Payroll Giving
  • Very simple for payroll staff to set up the scheme
  • Payroll Giving award winning businesses will be named on Payroll Giving agency websites
  • Fosters good relations between employers and employees
  • Employees can state exactly how much they wish to donate and can opt in and out at their choosing
  • Businesses can state that they are participants of a Payroll Giving scheme and name charities they donate to on business websites
Companies and employees who do wish to support charities through donations should consider setting up a payroll giving scheme. This is one of the simplest ways to make donations and is tax free. Payroll giving can be a great addition to any fundraising activities arranged through businesses.

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