Accountants could save tax through the payroll giving scheme

Fewer employees are now giving money to charity through their company payroll, even though overall charitable donations have increased, according to research carried out by chartered accountants Wilkins Kennedy.

The payroll scheme reached its peak in 2007/08, with 758,000 members making contributions deducted straight from their salary. However, a lot of workers have left the scheme because of redundancy or due to financial hardship.

Head of charity at Wilkins Kennedy, John Howard, explained that the decline was a major concern as payroll donations are high margin and attract virtually no administration costs. Donors who move to new jobs are not enrolled automatically into the scheme and it would reduce the attrition rate if the government made it easier for employees to transfer donations from one job to another.

Although the number of people donating through payroll has dropped, the amount donated via the scheme has risen from £104 million to £106 million in the last 12 months. This proves that the scheme is effective when administered correctly.

More needs to be done to encourage payroll giving, says Howard. The scheme has a high rate of retention and provides a reliable stream of funding to charitable organisations.

Employees who take advantage of the payroll giving scheme are getting immediate tax relief on their donation because it is deducted at source before Income Tax deductions. This means a £10 donation costs an employee £8 if they pay basic rate tax and £6 if they are taxed at the higher rate.

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