How the scheme runs
GOV.UK sets the order: the donation is taken from pay before tax but after National Insurance. Tax relief is automatic at the employee's top rate of Income Tax, and nobody fills in a form to claim it. Charities cannot add Gift Aid to Payroll Giving donations.
No employer has to offer a scheme. To set one up you sign up with an agency from HMRC's approved list, hand employees its forms, deduct the agreed amounts each payroll run and send the total to the agency, which pays the charities. Agencies usually take an administration fee from donations; you can pay the fee instead, and that cost is deductible from business profits.
What a £20 donation costs
| Taxpayer | Tax rate | Tax saved | Cost from take-home |
|---|---|---|---|
| Basic rate | 20% | £4.00 | £16.00 |
| Higher rate | 40% | £8.00 | £12.00 |
| Additional rate | 45% | £9.00 | £11.00 |
The charity receives £20, less any agency fee the employee bears. National Insurance does not change: on £2,500 a month a category A employee still pays 8% on £1,452, which is £116.16, donation or not.
Where it appears on a payslip
The donation shows as its own deduction, usually labelled Payroll Giving, sometimes with the agency's name. Because it comes before tax, the taxable pay figure on the payslip is lower than the pay used for NI. With no other pre-tax items on the payslip, that gap should equal the donation; if taxable pay and NIable pay are the same, the relief has not been given.
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Related terms
Questions
Is Payroll Giving taken before or after tax?
Before Income Tax and after National Insurance. Tax relief is given at source at the employee's highest rate, while NI is still worked out on full pay.
Do employers have to offer Payroll Giving?
No. It is optional. An employer who does offer it must use an HMRC-approved Payroll Giving agency, make the deductions each payroll and pass them to the agency.
Can the charity claim Gift Aid on Payroll Giving?
No. Payroll Giving already gives the employee tax relief through payroll, so GOV.UK says charities cannot also claim Gift Aid on these donations. The relief stays with the donor instead.
Sources
- GOV.UK: Payroll Giving (read 8 October 2026)
- HMRC: Approved agencies for Payroll Giving (read 8 October 2026)
- HMRC: Rates and thresholds for employers 2026 to 2027 (read 8 October 2026)
Figures are for the 2026/27 tax year unless the text says otherwise. This page explains a payroll term; it is general information, not tax or legal advice.