The Institute of Fundraising is to commission an independent body to conduct a “root and branch” review of Payroll Giving.

At present, Payroll Giving generates £86 million for the third sector, but the tax-efficient mechanism is only used by between 2% and 3% of those employees on Pay As You Earn schemes. Only around 620,000 people are signed up to Payroll Giving, but between five and seven million have access to it.

The review intends to explore the drivers of Payroll Giving, identify the barriers to it, and make recommendations to address them.

Lindsay Boswell, chief executive of the Institute of Fundraising, said: “Despite significant investment in Payroll Giving and activity to support the stakeholders engaged, the Institute considers that the mechanism has not reached its full potential.”

“It is vital that this independent Payroll Giving review captures the views and opinions of charities and takes into account changes that have occurred in our sector since the last Payroll Giving review 20 years ago,” Boswell added. “We intend to fully explore and understand the impact of the mechanism on charities in the UK.”