Tax free bikes with the Cycle to Work scheme

Former_MSE_Wendy

[title=http://images2.moneysavingexpert.com/images/dp/wtd_underline.gif] What this is all about?[/title]
Employees are able to get tax free bikes (and accessories) through an employer salary sacrifice scheme as part of the government’s Cycle To Work scheme.

The way it works:

You get a new bike with money loaned from your employer, which you then pay back in monthly payments from your salary BEFORE you pay tax and National Insurance. For example you give up £500 of salary, which (for basic rate tax payers) is worth £300ish in your pocket, saving you around £200. Although it’s a type of loan you won’t be credit checked.

As the name suggests, the aim of the scheme is to encourage people to cycle to work. You don’t have to do this everyday but the government is trying to encourage us to be healthy, reduce pollution and as a result save money; employees with cheaper bikes and employers with NI and VAT (which are usually passed on to the employee) savings.

First you should ask your employer if it’s already part of a scheme (there are several) but if yours isn’t the CycleScheme website aims to help you as easy as possible for you to persuade your employer.

[title=http://images2.moneysavingexpert.com/images/dp/wtd_underline.gif] Who can get a bike?[/title]
Employees over the age of 18, earning more than minimum wage, with a contract lasting longer than the loan term of the bike (usually a year), are eligible.

The process is pretty simple:

You choose the bike you want (and any accessories), including an electric or folding bike, from one of around 1000 bike stores. The total maximum cost must usually be less than £1,000.

Contact Cyclescheme to say you’re interested and it’ll send you some info to pass on to your employer. You can [EMAIL="info@cyclescheme.co.uk"]email[/EMAIL], call 01225 448933 or fill in the online request for an employer brochure, and someone from Cyclescheme will call you back.

Once you’re employer has been decided to take part, it needs to fill in a couple of forms and you’ll then get a voucher to take to the bike shop to swap for your bike.

You then pay back the loan from your salary. At the end of the loan you also need to pay a ‘Fair Market Value’ payment of around 5% and then the bike is yours to keep.

As you're repaying a loan on the bike, if it is stolen in the first year you are still responsible for the payments. It may be worth getting the bike insured or checking if it's covered under your Home Insurance policy.

[title=http://images2.moneysavingexpert.com/images/dp/wtd_underline.gif] Can you get a cheaper bike?[/title]
If the scheme's not for you or your employer doesn't want to take part, see if the MegaShopBot can save you money or read the Giveaway Sites guide for tips on bagging a freebie.

And let us know below if you’ve used the scheme and what you thought of it.

Bennifred

Yep - excellent deal! :beer:

Jimibeee

Yes I have one on this scheme very cheap way of buying a bike plus it spreads it over a few months, you can get electric bikes and folding bikes as well from halfords scheme and wiggles.

Cyclingmum

I bought a bike through this scheme but I think it's a bit misleading saying you are saving 40%. This would only happen if you pay higher rate tax as the saving is made because the payments are taken from your pre-tax salary. In fact if you choose a £500 bike, for instance, you still pay £500 for it but you won't pay tax on the income used to pay for it. Also as it is a salary sacrifice scheme it effects your pension contributions which I don't think a lot of people appreciate. Obviously if you buy a cheaper bike this is not very significant but it is something that should be factored into the overall saving. However it's a good way of buying a good bike that you might otherwise not be able to pay for in a lump sum and if it encourages more people to get on their bikes it can only be a good thing.

LeeSouthEast

Considered this, but given the email arrived within the same period as the "we don't have any money left and won't have for another 5 years" email, I deleted them both!

eagle_eye

Did this two years ago and managed to get 2 bikes in the space of a year [1 racer and 1 mountain bike] for £1500. I saved about £600 on this as I was a 40% taxpayer at the time. I had just about finished paying for them when my employer made me redundant! Still a good deal even if you are not a high rate taxpayer,but my company used Halfords and their servicing left a bit to be desired. Still use the bikes regularly though

Any

Cyclingmum wrote: »

I bought a bike through this scheme but I think it's a bit misleading saying you are saving 40%. This would only happen if you pay higher rate tax as the saving is made because the payments are taken from your pre-tax salary. In fact if you choose a £500 bike, for instance, you still pay £500 for it but you won't pay tax on the income used to pay for it. Also as it is a salary sacrifice scheme it effects your pension contributions which I don't think a lot of people appreciate. Obviously if you buy a cheaper bike this is not very significant but it is something that should be factored into the overall saving. However it's a good way of buying a good bike that you might otherwise not be able to pay for in a lump sum and if it encourages more people to get on their bikes it can only be a good thing.

The Cycle scheme we run means that the company buys the bike and then "hires" it to you for 12 mths while you are paying that salary sacrifice, but the company can reclaim VAT at 15% so you DON'T pay that either...
So it is not only that 20% income tax you are saving..

Any

Any wrote: »

The Cycle scheme we run at work means that the company buys the bike and then "hires" it to you for 12 mths while you are paying that salary sacrifice, but the company can reclaim VAT at 15% so you DON'T pay that either...
So it is not only that 20% income tax you are saving..

Yep, I just double checked it on the website and as a part of the scheme if the employer can claim VAT then you don't pay it.

Check here the real savings
http://www.cyclescheme.co.uk/

ds1980

As covered by a few on here just some pointers. Not all companies can and will claim the VAT back making this more expensive.

There are calculators to check compared with salary and things but these are only a guide.

We have a scheme and are VAT registered but we don't claim the VAT back so it works out more expensive to the purchaser. In essence you will have a lease contract with your employer who then has the right to sell you the bike at the end of the period. Make sure you get what the purchase price will be. We are selling them for £1.

Good but i would say savings are between 30-50% not 40% and there are pension issues as described above.

Any

ds1980 wrote: »

As covered by a few on here just some pointers. Not all companies can and will claim the VAT back making this more expensive.

There are calculators to check compared with salary and things but these are only a guide.

We have a scheme and are VAT registered but we don't claim the VAT back so it works out more expensive to the purchaser. In essence you will have a lease contract with your employer who then has the right to sell you the bike at the end of the period. Make sure you get what the purchase price will be. We are selling them for £1.

Good but i would say savings are between 30-50% not 40% and there are pension issues as described above.

True, not every company is VAT registered, completely agree with your point. However if you are VAT registered, why wouldn't you claim the VAT back and make this cheaper for your employees?

adrian.ashton

this is a great scheme, but sadly if you're self employed you can't access it - but instead you can reclaim the cost of the bike through 'apportionment' or a mileage rate (like for cars): but with a rate of 20p/mile able to be claimed on your tax return, you'll probably find that you're making money in this investment!

happy to post further details on request or see my blog (can't link to it here as apparently links not allowed in posts)