Higher-rate tax could boost workplace giving 2

Fundraising | Niki May Young | 2 Feb 2011

Charities could stand to benefit from tax band changes which will see an additional 750,000 people paying 40 per cent tax on their salaries.

The higher-rate tax changes come into force from 5 April and could provide incentive to employees to regularly donate through their work, according to campaigners for workplace giving, Geared for Giving.

"It may, at first sight, appear to be bad news for those affected but it could be great news for charities if only more employees were aware of Workplace Giving," a spokesperson for the campaign said.

While charities can only claim the standard rate of tax on gift aid donations, they can claim the full tax rate the employee would have paid when donations are made through workplace giving schemes.

Geared for Giving advised that in a poll of over 1000 employees, 68 per cent said they would be happy for charitable deductions to be made from their pay in an opt-out rather than opt-in system. Although 64 per cent stated that they would want a say in which charity their donations went to.

Rosie Runciman of the Geared for Giving campaign called for employers to get on board: "If employers could do one thing this year which would cost them nothing but help good causes it would be to ensure they offer a workplace giving scheme."

Some 45 per cent of employees do not have access to workplace giving schemes.

Place a comment

Elena Joseph
Head of New Projects
Workplace Giving UK
7 Feb 2011

I wouldn't say you are being a miserable git but I would say you are missing the point. At the moment many higher rate tax payers donate to charity and tick a gift aid box, very few then go on to claim the difference between standard and higher rate tax in their tax returns so this money is lost to the charity. Giving from pay isn't meant to be an incentive as such, it is meant to make it easy and to ensure that all giving is tax efficient.

Giving from pay is the only mechanism of regular donation which attracts more men than women.

Using your suggestion regarding smaller pay packets, that would lead a reader to believe that those who earn more, donate more - this is also not necessarily the case - giving from pay is meant to be optional, have freedom of choice for the employee regarding who they want to give to and how much they can afford to give - unfortunately not enough employers offer the scheme.

[Reply]

Adrian Beney
Partner
Iain More Associates
3 Feb 2011

I don't want to be a miserable git about this, but as an incentive for giving this seems to me be nonsense. People are going to pay more tax, and somehow this will an incentive to give more to charity? All the research shows that tax relief is rarely an incentive anyway, although it does influence the amount people are willing to give. But this seems to me to a hard one to sell.

Of course it's true that whereas a gift of £10 a month would have seen £8 come out of their pay packet before April 6th, and after this date the £10 gift will cost "only" £6, their overall pay packet will still be smaller.

The only people who will actually benefit from this are those who are not paying higher rate tax now, who will be after after April 6th _and_ who are giving a good £300 or so a month to charity. They will see their tax relief increase, offsetting the amount of extra tax they would otherwise have paid. In other words, really generous donors will be no worse off from a tax point of view (although they will still pay more NI) and everyone else in this band will have a smaller pay packet, however much they give.

Or have I missed something?

[Reply]

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