Feeling Charitable?

Have you considered setting up a Payroll Giving scheme?

Over 9,000 businesses already offer the benefits of Payroll Giving to around 5 million employees, raising over £120 million every year for the causes people support.

There is room for growth though. Currently only 4% of UK employees contribute through Payroll Giving schemes. In the US, the employee participation rate is nearly 35%.

What is Payroll Giving and why should I consider offering it?

It is a flexible scheme which allows anyone who pays UK income tax to give regularly and on a tax free basis to the charities and good causes of their choice…and it’s good for business!

Research shows that companies which offer Payroll Giving believe it improves the company image, enhances community involvement programmes, and supports employee volunteering.

Running a Payroll Giving scheme shows that you are committed to working in partnership with the community, something that is increasingly important to customers and staff. It shows that you care about your staff – offering them the benefits of Payroll Giving can help to build better employee relations and attract the right people to come and work for you. It is easy and inexpensive to run, and you get a deduction against your profits for your costs.

How does Payroll Giving work?

Simple. Your employee asks you to deduct regular charitable donations from their pay. You make the deduction from pre-tax pay – in other words, after calculation of National Insurance Contributions but before deduction of Pay As You Earn tax.

This way your employee gets tax relief straight away at their top rate of tax. For example, giving £10 a month costs a basic rate taxpayer only £8 because they save £2 in tax. For a higher rate taxpayer the cost is only £6 because they save £4 tax. Indeed for higher rate tax payers it is the only way to pass on their 40% or 45% tax to charities. Only 28% can be recouped via other ways of giving.

You, as an employer, pay over all the money you deduct to an Inland Revenue-approved Payroll Giving agency, and they do the rest – distributing the money to the charities nominated by your employees.

Isn’t it complicated?

No. Most of the administration is carried out by Payroll Giving in Action and your chosen agency. All modern payroll systems can handle Payroll Giving. There are no tax forms to complete. And the records you need to keep are straightforward.

If you would like to discuss setting up Payroll Giving on your payroll please contact louise.mccabe@aab.uk or your usual AAB contact.