Charities fear they will lose out because of the chancellor's tax cut

One out of every three people surveyed told the charity they would donate an average of �9.60 each month direct from their pay packets.

But many were stopped from doing so because they did not know how to.

The Treasury says it will work with charities to increase awareness of the scheme as they face a drop in funding because of changes to the tax system.

Oxfam is trying to boost payroll giving to make up for the expected fall in the funds it gets through the Gift Aid scheme.

It allows charities to claw-back the income tax donors have already handed over to the government on the money they give to the needy.

Less money

Gordon Brown's cut in the basic rate of tax from next year means charities will get 2p per pound less from donations made under the scheme.

Under payroll giving, cash is paid straight to the charity by the donors' employers before tax.

If we can raise the profile of payroll giving just a notch, we can make an even bigger difference Barbara Stocking, Oxfam

That means a higher rate taxpayer can make a donation of �10 and in effect only lose �6 from their take-home pay, with the rest of the money being the income tax they would never have seen anyway.

Barbara Stocking, director of Oxfam, said the scheme remained "hidden from public view."

"If we can raise the profile of payroll giving just a notch in the UK, we can make an even bigger difference," she added

Researchers working for Oxfam found just 4% of those they questioned were signed up for the scheme at the moment.

Further benefit

But the survey of 2,000 adults found a third would be prepared to use it - if they knew how.

According to the Treasury, Gift Aid donations have risen form �135m in 1997 to �750m last year, while payroll giving has risen three-fold in the same time.

"The government believes that there is scope for charities to benefit further from Gift Aid," said a spokesman.

It has now promised to work with charities to make people more aware of the payroll giving scheme ahead of next year's tax changes.