To put it simply, your employer will take your donation off your salary before working out the tax you owe to the tax man. For example, if you earn £1000 per month and donate £100 per month through payroll giving, the amount you will be taxed on is £900.
This is significant because this means that a £100 donation has only cost you £80 (20% tax payer) or £60 (40% tax payer). This is because you have not been required to pay tax as it deducted before your tax is calculated: (100 x 20%= £20) or (100 x 40% = £40).
Why a cash donation isn’t effective.
The most common way for most people to donate is by giving cash. However, to give £100 from your
National Insurance Contributions
Please bear in mind that for National Insurance Contributions will not be reduced by the donation figure. It is only the Tax Due on your salary that will change.
Please note that there is
In many cases, employers set up a monthly donation to cover the admin fee’s for donations made by staff.
Fundemtally the most efficient way
To me, Payroll Giving is a no-brainer if you are looking to donate to charity. It reduces the tax paid by yourself making the donation ‘cheaper’.
More info can be found via the Charities Aid Foundation here.