Give As You Earn (often abbreviated to GAYE) is a tax-efficient method of giving earned money to charity in the UK.

Almost everybody in the UK has income tax deducted from their salary at source through PAYE - Pay As You Earn. This means that what ends up in your bank account is yours, and (usually) there is no further tax to pay.

On the other hand, donations to registered charities that are of no benefit to the donor can be made exempt of income tax, as is the case in many countries. One way this is handled is by filling in a Gift Aid form. This allows the charity to reclaim the "basic rate" income tax on your donation. If you are a higher rate tax payer, you can then reclaim the higher-rate part of the income tax on your annual tax return.

A more efficient way, though, is to use GAYE, if you employer supports it. With GAYE, a portion of your monthly gross income is set aside by your employer, and sent off to the Charities Aid Foundation (or another organisation who manages GAYE). This means that the tax is never deducted, and the entire sum is available to give to charaties. The CAF takes a small percentage (4%) as a management fee, however, the huge majority of employers cover this. Some employers also add to the amount you give, and until April 2004, the Chancellor of the Exchequer added a further 10% to GAYE donations.

Once the money is at the CAF, one of two things can happen.

  • The CAF can have a list of regular recipients of your money. For example, you could give £60 every month, and specify that £10 should go to each of 6 charities.
  • The funds go into a "charity account" and the CAF gives you a "charity chequebook". This is a book of "charity cheques" which you fill in like a usual cheque - recipient, amount, date and signature, and the money is paid out of your account. However, the recipient must be a registered charity and you must receive no benefit from the donation.

This scheme encourages regular donations to charity in a tax efficient manner.

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