Thanks for the code you gave i used a bit of what you posted and adapted the code I am using (which works with transparency) and it now works 
<?php
/**
* PNG ALPHA CHANNEL SUPPORT for imagecopymerge();
* This is a function like imagecopymerge but it handle alpha channel well!!!
**/
// A fix to get a function like imagecopymerge WITH ALPHA SUPPORT
// Main script by aiden dot mail at freemail dot hu
// Transformed to imagecopymerge_alpha() by rodrigo dot polo at gmail dot com
function imagecopymerge_alpha($dst_im, $src_im, $dst_x, $dst_y, $src_x, $src_y, $src_w, $src_h, $pct){
if(!isset($pct)){
return false;
}
$pct /= 100;
// Get image width and height
$w = imagesx( $src_im );
$h = imagesy( $src_im );
// Turn alpha blending off
imagealphablending( $src_im, false );
// Find the most opaque pixel in the image (the one with the smallest alpha value)
$minalpha = 127;
for( $x = 0; $x < $w; $x++ )
for( $y = 0; $y < $h; $y++ ){
$alpha = ( imagecolorat( $src_im, $x, $y ) >> 24 ) & 0xFF;
if( $alpha < $minalpha ){
$minalpha = $alpha;
}
}
//loop through image pixels and modify alpha for each
for( $x = 0; $x < $w; $x++ ){
for( $y = 0; $y < $h; $y++ ){
//get current alpha value (represents the TANSPARENCY!)
$colorxy = imagecolorat( $src_im, $x, $y );
$alpha = ( $colorxy >> 24 ) & 0xFF;
//calculate new alpha
if( $minalpha !== 127 ){
$alpha = 127 + 127 * $pct * ( $alpha - 127 ) / ( 127 - $minalpha );
} else {
$alpha += 127 * $pct;
}
//get the color index with new alpha
$alphacolorxy = imagecolorallocatealpha( $src_im, ( $colorxy >> 16 ) & 0xFF, ( $colorxy >> 8 ) & 0xFF, $colorxy & 0xFF, $alpha );
//set pixel with the new color + opacity
if( !imagesetpixel( $src_im, $x, $y, $alphacolorxy ) ){
return false;
}
}
}
// The image copy
imagecopy($dst_im, $src_im, $dst_x, $dst_y, $src_x, $src_y, $src_w, $src_h);
//imagecopymerge($dst, $src, 0, $halfHeight, 0, $halfHeight, $width, $halfHeight, $pct);
}
// USAGE EXAMPLE:
$img_a = imagecreatefrompng('images/back.png');
$img_b = imagecreatefrompng('images/front.png');
// SAME COMMANDS:
//imagecopymerge_alpha($img_a, $img_b, 0, 0, 0, 0, imagesx($img_b), imagesy($img_b),100);
imagecopymerge_alpha($img_a, $img_b, 0, (imagesy($img_b)/100)*30, 0, (imagesy($img_b)/100)*30, imagesx($img_b), (imagesy($img_b)/100)*30, 100);
// OUTPUT IMAGE:
header("Content-Type: image/png");
imagesavealpha($img_a, true);
imagepng($img_a, NULL);
?>
In the code the *30 a few lines from the bottom would represent the percentage to not show, so if the donation total was 70% reached then 30 would be used there to show 70% of the image an leave the top 30% hidden.
Once I finish building the donation calculation part the 30 would be replaced by a variable containing the value.
Hopefully this complete code will be useful for someone else.
Thanks again for the help I had such a hard time figuring out that small simple bit 