Payroll Giving Explained: Tax-Free Donations in 2026/27
How Payroll Giving works in the UK for 2026/27: claim tax relief at source on charity donations, save 20%, 40% or 45%, and see worked examples.
Quick answer
Payroll Giving lets you donate to charity straight from your wages before income tax is taken, so relief is given at your highest rate automatically. In 2026/27 a GBP 10 pledge costs GBP 8 at the 20% basic rate, GBP 6 at 40% and GBP 5.50 at 45%. There is no tax return to file and no upper limit on giving.
What is Payroll Giving?
Payroll Giving, sometimes called Give As You Earn (GAYE) or workplace giving, is an HMRC-recognised scheme that lets employees donate to charity directly from their pay. The crucial detail is the order of operations: the donation is deducted from your gross pay before income tax is calculated, but after National Insurance.
Because the money never enters the income-tax base, you receive relief at your marginal rate the moment the deduction happens. There is nothing to reclaim and no paperwork at year end. Your employer sends the deductions to an approved Payroll Giving agency, which then distributes the money to the charities you choose.
The scheme is voluntary for employers. If yours offers it, you will usually find it in your payroll or benefits portal. If not, you can ask HR to set one up or simply donate directly and use Gift Aid instead.
How the tax relief works in 2026/27
The 2026/27 income tax structure (England, Wales and Northern Ireland) determines how much you save. The Personal Allowance is GBP 12,570, with a basic rate of 20%, higher rate of 40% above gross earnings of GBP 50,270, and an additional rate of 45% above GBP 125,140.
Your Payroll Giving saving equals your top marginal income tax rate multiplied by the amount pledged. Here is how a GBP 10 pledge breaks down:
| Tax band | Rate | Tax relief on GBP 10 | Net cost to you | Charity receives |
|---|---|---|---|---|
| Basic | 20% | GBP 2.00 | GBP 8.00 | GBP 10.00 |
| Higher | 40% | GBP 4.00 | GBP 6.00 | GBP 10.00 |
| Additional | 45% | GBP 4.50 | GBP 5.50 | GBP 10.00 |
The charity always receives the full GBP 10. The relief reduces what comes out of your net pay, not what the charity gets. That is the opposite of Gift Aid, where the charity grosses up your donation.
A note on the 60% effective band
If your income falls between GBP 100,000 and GBP 125,140, your Personal Allowance is tapered away by GBP 1 for every GBP 2 of income, creating an effective marginal rate of 60%. Pledging through Payroll Giving in this band reduces your taxable income and can recover some of your allowance, so the effective relief is unusually generous. Use a
Take-Home Pay Calculator
Calculate your net salary after income tax, National Insurance and student loan deductions.
Open Take-Home Pay calculatorPayroll Giving versus Gift Aid
Both routes get tax-effective money to charity, but they work differently.
With Gift Aid, you donate from net (after-tax) pay and the charity reclaims 25% basic-rate relief from HMRC, turning your GBP 8 into GBP 10. Higher and additional-rate taxpayers must then claim the extra relief themselves through Self Assessment or by asking HMRC to adjust their tax code. With Payroll Giving, all the relief -- basic, higher and additional -- is applied at source through PAYE, so there is no reclaim and no tax return.
The practical upshot:
- Basic-rate taxpayers: net cost is similar either way (GBP 8 for a GBP 10 gift). Gift Aid is easier to start because it needs no employer scheme.
- Higher and additional-rate taxpayers: Payroll Giving is usually simpler because you avoid the Self Assessment step that Gift Aid requires to claim the extra 20% or 25%.
- People who do not file a tax return: Payroll Giving guarantees you get full higher-rate relief automatically, which is easy to miss with Gift Aid.
| Feature | Payroll Giving | Gift Aid |
|---|---|---|
| Donation taken from | Gross pay | Net pay |
| Relief at higher/additional rate | Automatic at source | Claim via Self Assessment |
| Charity reclaims anything | No | Yes (25% basic) |
| Needs employer scheme | Yes | No |
| Tax return required | No | Only for higher-rate top-up |
Worked example: a higher-rate donor
Suppose Priya earns GBP 60,000 and pledges GBP 50 a month (GBP 600 a year). As a higher-rate taxpayer, her relief is 40%.
- Annual pledge: GBP 600
- Income tax relief at 40%: GBP 240
- Net cost to Priya: GBP 360
- Charity receives: GBP 600
If Priya used Gift Aid instead, she would donate GBP 480 from net pay, the charity would reclaim GBP 120 to reach GBP 600, and she would then have to claim a further GBP 120 through Self Assessment to bring her net cost down to GBP 360. Same final cost, but Payroll Giving gets her there in one step. To check how a deduction like this changes her monthly take-home, the
Income Tax Calculator
Work out how much income tax you owe using the latest 2025/26 UK tax bands.
Open Income Tax calculatorWorked example: a Scottish taxpayer
Scotland sets its own income tax rates. For 2026/27 the bands are starter 19%, basic 20%, intermediate 21%, higher 42%, advanced 45% and top 48%. Payroll Giving gives relief at your top Scottish rate.
| Scottish band | Rate | Relief on GBP 100 pledge | Net cost |
|---|---|---|---|
| Intermediate | 21% | GBP 21 | GBP 79 |
| Higher | 42% | GBP 42 | GBP 58 |
| Advanced | 45% | GBP 45 | GBP 55 |
| Top | 48% | GBP 48 | GBP 52 |
A top-rate Scottish donor giving GBP 100 has only GBP 52 taken from net pay while the charity still receives the full GBP 100. The mechanism is identical to the rest of the UK; only the relief percentage changes because Scotland sets its own rates.
How to set up Payroll Giving
- Check availability. Ask your payroll or HR team whether your employer runs a Payroll Giving scheme through an HMRC-approved agency.
- Choose your charities. You can give to any HMRC-recognised charity and usually split one deduction across several.
- Set your amount. Decide how much per pay period. There is no statutory maximum, but relief is only useful up to the income tax you actually pay.
- Confirm the deduction. Your employer adds it to PAYE; it appears on your payslip before income tax is applied.
- Review periodically. You can change amounts or charities at any time by contacting payroll or the agency.
Things to watch
- You need enough taxable income. If your earnings fall within the Personal Allowance (GBP 12,570) and you pay no income tax, there is no relief to gain, though you can still donate.
- Relief stops if you leave. Deductions end with your final payslip, so set up a new scheme at your next employer or switch to Gift Aid to keep supporting your charity.
- NI is unaffected. Do not expect the donation to cut your National Insurance; it only reduces income tax.
- Agency fees. Some agencies deduct a small administration fee before passing money on, though many employers cover this so the charity receives the full amount.
The bottom line
Payroll Giving is one of the most efficient ways to give in the UK because relief is applied at your full marginal rate, automatically, with no tax return. For 2026/27 a GBP 10 pledge costs GBP 8, GBP 6 or GBP 5.50 depending on whether you pay 20%, 40% or 45% income tax, and Scottish donors can save up to 48%. If your employer offers a scheme, it is usually the simplest route for higher-rate givers. If not, Gift Aid remains a strong alternative. Either way, model the impact on your pay with a
Take-Home Pay Calculator
Calculate your net salary after income tax, National Insurance and student loan deductions.
Open Take-Home Pay calculatorFrequently asked questions
What is Payroll Giving?
Payroll Giving (also called Give As You Earn or GAYE) is a scheme that lets you donate to charity straight from your wages before income tax is deducted. Your employer runs the deductions through PAYE and passes them to an approved Payroll Giving agency, which forwards the money to your chosen charities. Because the donation comes out of your gross pay, you get tax relief immediately at your top rate of tax, with no need to claim anything back later.
How much tax do I save with Payroll Giving in 2026/27?
You save tax at your highest marginal rate. A basic-rate (20%) taxpayer who pledges GBP 10 has only GBP 8 taken from net pay, so the charity gets GBP 10 for a GBP 8 cost. A higher-rate (40%) donor pays GBP 6 for the same GBP 10, and an additional-rate (45%) donor pays GBP 5.50. Scottish rates differ. National Insurance is still charged on the full salary, so relief applies to income tax only.
Is Payroll Giving better than Gift Aid?
It depends on your tax rate. With Gift Aid the charity reclaims 25% basic-rate relief and you claim any higher-rate relief through Self Assessment. With Payroll Giving you get full relief immediately at source, including higher and additional rate, with no tax return needed. For higher and additional-rate taxpayers who do not file a return, Payroll Giving is usually simpler. For basic-rate taxpayers the net cost is similar.
Does my employer have to offer Payroll Giving?
No. Payroll Giving is voluntary for employers, so it is only available if your employer has set up a scheme with an HMRC-approved Payroll Giving agency. Many large employers offer it, often promoting it through workplace giving campaigns. If yours does not, you can ask HR or payroll to set one up, or use Gift Aid instead when donating directly to charities.
Can I choose which charities receive my donation?
Yes. You can give to any charity recognised by HMRC, and most agencies let you split a single deduction across several charities. You can usually change your chosen charities or amounts at any time by contacting your payroll department or the agency. Some employers also match employee donations, which increases the total the charity receives at no extra cost to you.
Do I still pay National Insurance on Payroll Giving donations?
Yes. Payroll Giving reduces your taxable income for income tax purposes only, not for National Insurance. Employee Class 1 NI in 2026/27 is 8% on earnings between GBP 12,570 and GBP 50,270 and 2% above that, and it is calculated on your gross pay before the charitable deduction. So the tax saving comes purely from income tax, not NI.
Is there a limit on how much I can give through Payroll Giving?
There is no statutory upper limit on Payroll Giving donations, though some employers or agencies may set practical minimums per deduction. You can give as much of your pay as you wish, but relief is only useful up to the amount of income tax you actually pay. If you give more than your taxable income, you cannot get relief on the excess through this scheme.
How do Scottish taxpayers benefit from Payroll Giving?
Scottish income tax has six bands for 2026/27: starter 19%, basic 20%, intermediate 21%, higher 42%, advanced 45% and top 48%. Payroll Giving gives relief at your top Scottish rate, so a top-rate Scottish donor saves 48% on each pledged pound. The scheme works the same way through PAYE; only the percentage of relief differs because Scotland sets its own income tax rates.
What happens to my Payroll Giving if I change jobs?
Payroll Giving is tied to your employer's PAYE scheme, so it stops when you leave. Your old employer ends the deductions on your final payslip. To continue giving from your new salary, you need to set it up again with your new employer if they run a scheme. Alternatively you can switch to direct donations with Gift Aid so your charity does not lose your support during the gap.
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