CYCLE TO WORK
WHAT IS IT?
The Cycle to Work scheme is designed to help customers save money on a new bike by spreading the cost across monthly tax-free payments via their employer.
HOW DOES IT WORK?
There are a number of cycle to work providers, each with their own slight differences but they essentially all work in the same way:
Your employer registers with a provider
(if they aren’t already).You visit your LBS and choose a bike, or a custom build, or in some cases, just parts and accessories.
Your employer pays in full for your bike.
You pay your employer back through monthly instalments taken from your salary across a year (or more depending on the provider).
Different schemes offer different maimum spends, but your employer will also advise on this too.
WHY IS IT GOOD?
Your repayments are taken from your salary gross before tax deductions, meaning every month you’re paying for the bike, you’ll be paying less tax and National Insurance.
In practical terms this means that you’ll save up to 32% of the actual cost of the bike for basic-rate taxpayers, and even more for higher rate taxpayers.
There’s the added bonus of breaking the bike’s cost down into much more manageable monthly payments.
At the end of your term, there’s usually a small payment to make. This is because technically speaking, you have been loaned the bike and HMRC asks you temn to by it at what they refer to as “fair market value”. In most instances, this works out to be around 7% - If you use the Green Commute Initiative however, they only charge £1.
The admin is fairly minimal for you and your employer and they too will benefit financially; Each month, they’ll be making a smaller NI contribution so they can save around 13% of the bike’s cost.