Gift Aid v Payroll Giving? 8 November 2011 at 10:04AM in Charities 5 replies 6.7K views

DiiFMaritime

Hi all,

I am trying to promote donating to charities within the company. Just wondering whether you guys can shed some light on which method would be better. My understanding is that Payroll Giving is more tax efficient for higher rate taxpayers whilst Gift Aid is better for lower rate taxpayers?

Any advise will be much appreciated.

oldtoolie

There's no difference for the donor. With Gift Aid, high rate taxpayers get a rebate when they file their tax return. With Payroll Giving, the gift is taken before tax. Payroll Giving requires cooperation with your companies accounts dept to setup and administer -- not difficult but they do have to agree.

barak

A slight advantage of Payroll Giving to higher rate tax payers is that they don't have to enter anything on their tax return [as they do for Gift Aid] because their donation is deducted from their salary/pension before it is taxed under PAYE.

There are advantages and disadvantages to charities. Payroll Giving has the obvious advantage of regular amounts being donated, and the slight disadvantage of an administration charge being deducted from those regular donations by one of the HMRC approved Payroll Giving Agencies.

My company generously encourages Payroll Giving by paying that monthly administration charge as well as matching the first £25 per month given by their employee/pensioner.

Savvy_Sue

Good points.

barak wrote: »

There are advantages and disadvantages to charities. Payroll Giving has the obvious advantage of regular amounts being donated, and the slight disadvantage of an administration charge being deducted from those regular donations by one of the HMRC approved Payroll Giving Agencies.

And the HUGE disadvantage to the charity that if someone leaves that company, their giving may well just stop, whereas if they've done a SO with Gift Aid, it's more likely to continue!

rob_2512

There seems another separate effect on the donor, and that is the impact on the P60 end of year return.

When I applied for a mortgage, they wanted to see my P60 as proof of income, but were not interested in my Gift Aid giving.

On the other hand, parental contributions to Student Loans are also based on P60 income, and also (unlike Tax Credits) ignore Gift Aid.

So I can see a reason that if you are supporting students, use Payroll Giving. But if you are planning to move house (or remortgage) use Gift Aid.

cubebot3

Payroll giving is a great way to donate to charity. As long as your company has a scheme you can donate to any registered charity. The benefit to you the donor is that it cost you less. For example, a donation of £5.00 will cost you £4.00 taken before tax and the £1.00 that normally is paid to the tax man is now sent with your £3.80. The charity ends up with a £5.00 donation minus admin charge to payroll giving agency (standard tax rate). With gift aid the charity receives £5.00 from the donor from their bank account and then have to reclaim the tax from the Inland Revenue. For some charities this is an arduous task and they may not claim it! Another benefit for payroll giving is your company may match your donations therefore charity can receive double each month. If you move to a different company you can set up the donation again if the company has a scheme. At least it's a safe way to donate and no-body has your bank details!