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Payroll Giving is Good for Business

Trading for Good Guide to Payroll Giving

Small business has long played a vital role in supporting charities and communities in the local area. There are countless ways of getting involved such as:

  • making a cash donation
  • encouraging staff to take part in fund raising or volunteering activities on behalf of an organisation
  • becoming a charity trustee or school governor
  • offering infrastructure or services free of charge
  • providing advice and information
  • encouraging your customers and supply chain to get involved in activities

And don't forget - your community doesn't need to be geographically close. Why not bring together a community of like-minded people - such as your suppliers or customers - even if they are spread out across the country?

Payroll Giving is growing rapidly

Payroll Giving has increased from £37 million in 1999/2000, to over £129 million in 2016/2017. There is room for further growth. Only 4% of UK employees participate in Payroll Giving schemes. In the US, the employee participation rate is nearly 35%. Payroll Giving can make a tremendous difference to UK charities. If we could increase participation to 10% of UK employees, then charities would receive an additional £200 million.

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. 96% of companies feel that Payroll Giving is something a good employer should offer....

And nearly all said they would like to increase participation levels in their organisations.

What is payroll giving?

Payroll Giving is a way for your employees to make regular payments to charity directly from their pay. They can donate as much or as little as they want. Charities benefit because they get regular donations to help them with good causes. And your employees benefit because they get tax relief on donations straight away.

Payroll Giving 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.

Payroll Giving donations are deducted before tax so each £10.00 you give will only cost you £8.00, and if you're a higher rate tax payer it will only cost you £6.00.

Payroll Giving (also known as Give As You Earn or workplace giving) is a valuable, long term source of revenue, providing regular income to help charities budget and plan ahead more effectively. Employees can choose to support any charity of their choice with a regular donation direct from their pay.

Higher rate taxpayers- the only way to pass on your 40% or 45% tax to charities. Only 28% can be recouped via other ways of giving.

What help can you get?

To set up a Payroll Giving Scheme you need to sign up with an approved Payroll Giving Agency. HM Revenue & Customs (HMRC) approves Payroll Giving Agencies and lists them on its website. 

Once this has been set up, you'll make regular deductions from your employees’ pay through your payroll system. You deduct the amount an employee asks you to take from their pay after working out and deducting their National Insurance contributions, but before applying PAYE.

You pass on all the donations you've deducted to an approved Payroll Giving Agency. They then distribute the donations to your employees' chosen charities - you don't have to do anything else. There are no extra tax forms to fill in.

What do you have to do?

You'll need to keep certain records if you run a Payroll Giving Scheme. These are:

  • a copy of your contract with the Payroll Giving Agency
  • the forms that your participating employees fill in authorising you to make the deductions from their pay
  • a record of the deductions that you make from each employee's pay
  • a record of all the money you pass on to the Payroll Giving Agency

The Payroll Giving Agencies do most of the administrative work and meet most of the costs. Most deduct a small charge from the donations to cover these administrative costs - up to about 4% is usual. They distribute what's left to your employees' chosen charities.

If you want to, you can pay this administration cost for the Payroll Giving Agency so that the charities get the whole amount of your employees' donations. If you do this you can set whatever you pay against your profits for tax purposes.


Kevin Barber
About the Author

Kevin Barber

Trading for Good East of England. Helping small businesses strengthen their reputation and grow by showcasing the good work that they do in their communities.

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