PAYROLL GIVING vs GIFT AID

thegentleway

Purely from a tax perspective, is there any difference between payroll giving and gift aid?

zagfles

See https://www.cafonline.org/my-personal-giving/plan-your-giving/caf-give-as-you-earn/7-things-you-might-not-know-about-payroll-giving

Main difference is that if you're a higher rate taxpayer you get full relief in your payslip with Payroll Giving. With gift aid you have to claim higher rate relief back from HMRC every year.

Also if you're claiming tax credits and possibly other benefits, payroll giving might save you a heap of hassle. 

Savvy_Sue

It is slightly more beneficial to the charity to give direct and Gift Aid it but I can't speak to the tax side of things for the giver. 

thegentleway

zagfles said:

See https://www.cafonline.org/my-personal-giving/plan-your-giving/caf-give-as-you-earn/7-things-you-might-not-know-about-payroll-giving

Main difference is that if you're a higher rate taxpayer you get full relief in your payslip with Payroll Giving. With gift aid you have to claim higher rate relief back from HMRC every year.

Also if you're claiming tax credits and possibly other benefits, payroll giving might save you a heap of hassle. 

Thank you - my PAYE is basic rate but my self-employment takes me into higher rate. I have to submit tax return for self-employment anyway and it's no hassle for me as accountant does it.

thegentleway

Savvy_Sue said:

It is slightly more beneficial to the charity to give direct and Gift Aid it but I can't speak to the tax side of things for the giver. 

Thanks, slightly more beneficial to the charity to give direct because the middle man doesn't take a cut?

Savvy_Sue

I can't remember the details but I'll try to look it up later!

Savvy_Sue

thegentleway said:

Savvy_Sue said:

It is slightly more beneficial to the charity to give direct and Gift Aid it but I can't speak to the tax side of things for the giver. 

Thanks, slightly more beneficial to the charity to give direct because the middle man doesn't take a cut?

https://www.gov.uk/payroll-giving
The employer has to use an agency to pass the deductions to, and agencies may charge an administration fee. Employers can choose to pay the fee, meaning the charities will get more money, but they usually deduct this from the donations before passing them to the charity. 

But I've just remembered, there's one situation where GAYE would trump direct giving for a charity: some (generally larger!) employers will 'match-fund' GAYE donations from their employees! 

For a higher rate tax payer, the advantage of GAYE is that the donation is deducted from your gross pay before tax, so you don't have to 'fiddle around' reclaiming the higher rate of tax when you do your tax return. 

Skint_n_clueless

Worth considering here also is not just the middle man, in this case the agency that will forward your donation to your chosen charity, but the charity employee that also analyses these reports. I have been said employee and while most cases are straightforward, some agency reports are a fiddle and take time, which will further eat into the benefit of your donation.
Donating direct; via direct debit, standing order or cheque, will also incur a charity admin fee, as well as a (cheeky!) bank fee, but the charity can also claim the (basic rate) 20% back via the gift aid scheme from the UK govt.
Hope that helps.

thegentleway

Skint_n_clueless said:

Worth considering here also is not just the middle man, in this case the agency that will forward your donation to your chosen charity, but the charity employee that also analyses these reports. I have been said employee and while most cases are straightforward, some agency reports are a fiddle and take time, which will further eat into the benefit of your donation.
Donating direct; via direct debit, standing order or cheque, will also incur a charity admin fee, as well as a (cheeky!) bank fee, but the charity can also claim the (basic rate) 20% back via the gift aid scheme from the UK govt.
Hope that helps.

Thank you, I'm donating directly. Cheeky bank fee is real: it was £18.20 for using card but only £1.20 with Gocardless.

redpete

For the giver, payroll giving means you don't have to make a GA declaration, you get the tax and NI benefit immeditely and, (if you are a higher rate tax payer) you don't have to include it your SA tax returns.

For the charity, payroll giving means they don't have to claim the GA tax back.