The government has today initiated a consultation on proposals to reform Payroll Giving believing that there is scope to increase this by simplifying the scheme's administration and making it easier for donors to give.

Payroll Giving allows UK income taxpayers to give regularly and on a tax-free basis to the charities and good causes of their choice, with £118m donated by 735,000 people in the last tax year.

Donations are deducted from gross pay, so each £1.00 given will only cost a basic rate taxpayer 80p. At present, only 2% of employers offer Payroll Giving, while only 3% of employees give through such schemes.

Employees are normally recruited by Professional Fundraising Organisations that visit businesses, and transactions are handled by specialist Payroll Giving Agencies (PGA). Under the current rules, all PGAs must be charities.

The Government's proposals include simpler sign-up forms, faster processing times for donations to reach the charity and opening the PGA market to non-charitable orgnisations - with the aim for more investment into the system.

The economic secretary to the Treasury, Sajid Javid MP, said: "Charities do vital work in our communities, and this government is committed to helping them achieve more. Payroll Giving is a powerful and flexible way for people to support the causes they care about. The scheme has real untapped potential, not just for raising money for charity directly, but also for starting a giving culture among those that do not normally donate.

"The proposals that the government is publishing today are an important step in raising awareness and making this scheme work better for donors and charities alike."