How does the Payroll Giving scheme work and how much tax does it save?

Full answer

Payroll Giving (also called Give As You Earn) is run by employers through PAYE. You authorise a deduction from your gross salary, and the donation is taken before Income Tax is calculated, so relief is given at your highest rate automatically - no need to claim through Self Assessment as you would with Gift Aid. National Insurance is still charged on the full gross pay, so PILON-style NI relief does not apply; only Income Tax is saved. How the cost works for 2026/27: a GBP 10 monthly donation reduces taxable pay by GBP 10. A basic-rate (20%) taxpayer saves GBP 2, so the net cost is GBP 8. A higher-rate (40%) taxpayer saves GBP 4, net cost GBP 6. An additional-rate (45%) taxpayer saves GBP 4.50, net cost GBP 5.50. Scottish taxpayers get relief at their own band (up to 48% at the Top rate), making donations slightly cheaper. Worked example: a higher-rate taxpayer pledging GBP 50 a month gives the charity GBP 600 a year but only loses GBP 360 of net pay, because GBP 240 of Income Tax is never deducted. The charity receives the full pledged amount with no need to reclaim relief, which speeds up the money reaching them. A useful side effect: because the donation lowers your taxable income, it can help keep you below thresholds such as the GBP 100,000 point where the Personal Allowance starts to taper, or the High Income Child Benefit Charge band. Not every employer offers a scheme, and some use an approved agency that may take a small admin fee. Use the income tax calculator to see how a regular Payroll Giving deduction changes your taxable income and overall take-home pay.

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