Charity Donation Tax Deductions

Donating to charity, tax efficiently.

Now more than ever, charities need our help to make real change. Millions of people globally donate to charity. If they do so with tax deductions, their chosen causes get more of their hard-earned cash, and the tax man gets less of it. This means, in simple terms, that giving through the workplace, with Payroll Giving, with the support of your employer and their payroll systems, is the most tax efficient way of giving to charity. Charity donations with tax deductions mean that charities get more without it costing you any more.


Payroll Giving

Payroll Giving enables charities to receive regular and reliable income from employers and their employees. Payroll Giving donations are taken from employees’ gross pay, before income tax is calculated or deducted, so employees will pay less income tax to the tax man, and will be able to give more to their chosen charities.


What about Gift Aid?

You may have noticed when you donate to a charity online, or when you sponsor a friend in a charity endeavour like a walk, marathon or bike ride, you’re asked whether you’d like to contribute Gift Aid. Gift Aid is a UK tax incentive introduced in 1990 that enables tax-effective giving by individuals to charities.

Gift Aid is amazing, and has allowed charities to claim more, but Payroll Giving works even more tax-efficiently, helping all donations go even further. Gift Aid is capped at 25% and needs to be claimed by charities retrospectively, so if you give them £10, they can retrospectively claim an additional £2.50 from HMRC, making your donation worth £12.50.

Payroll Giving donations are not eligible for Gift Aid, because the donations are already made before tax. Therefore, the full tax benefit is already included in the donation. Payroll Giving donations are actually much better than Gift Aid, because they are not capped at 25% and charities receive the full amount up front and don’t need to retrospectively claim from HMRC for the additional amount.


GoodPAYE vs Gift Aid

The main difference is the amount of tax benefit. Gift Aid allows the charity to claim an extra 25p for every £1 donation they receive. Payroll Giving, however, is not capped, and enables supporters to make regular donations from their gross salary (before tax is calculated or deducted) which gives the donation immediate tax relief. So, it costs employees less to give more.

With GoodPAYE, as donations are deducted from gross salary (pre-tax), charities do not have to reclaim their tax benefit from HMRC. Instead, they receive the full amount of the donation (including the tax benefit) upfront, making it much more impactful for charities. The higher your income tax band, the more your charity will receive. For example, if you normally pay 40% income tax, then you can make a £16.66 payroll giving donation and it will only reduce your net take home pay by £10.  If you made that same £10 donation by another method and ticked the Gift Aid box, the charity would only receive £12.50.


Why use GoodPAYE?

At GoodPAYE we’ve developed an innovative, tech-led platform that allows workplace giving to fulfil its potential. Our charitable employee benefit platform makes charitable giving simple, efficient and impactful. With GoodPAYE, employees donate pre-tax, so their chosen charity gets more without it effecting their net take home pay.

Ready to make an impact?

Find out more about how Payroll Giving works for you.