cycle scheme - con trick? advice needed please.

saverdude

Hi folks.

I was about to enter the scheme with a view to getting a road bike for the max permissible value of £1000. However, I have some serious misgivings over the hmrc changes.

For a 1000 bike, the monthly salary sacrifice is 69.44 until January when it goes up to 83.33. So for payments starting in Sept 2011, this will be a total salary sacrifice of 944.30. Add on the 25% market value to buy the bike from the employer, this makes a total layout of £1194.30 - almost 200 more than the bike....

Now I realise that the sacrifice is taken from salary pre tax, but surely the financial benefits are marginal at best. Also bike shops are charged a percentage to participate in the scheme and are less likely offer discounts.

So the question is, cycle scheme or haggle and buy a bike myself on interest free credit?

Ps for £38k pa for tax purposes.

custardy

is the 25% not on the market value at the time the hire period ends?
so its not going to be £250

heres the breakdown for the Royal Mail set up (this is £500 as its their max)

Total Gross Costs
18 Monthly Gross Salary Reductions of: £ 24.51
Collection and Disposal Charge: £ 35.00
Total Salary Sacrifice with Collection and Disposal Charge: £ 476.29
No advance payment is required. You hire a bicycle and bicycle safety equipment for a fixed period of 18 months. At the end of the Period of Hire you will be charged a collection and disposal fee of £35 (from net pay).
Total Lower Rate Taxpayer Costs
18 Monthly Net Salary Reductions of: £ 16.91
Collection and Disposal Charge: £ 35.00
Lower Rate Taxpayer Total: £ 339.38

they charge a flat £35 so obviously it makes it an easier calculation

jimmo

custardy wrote: »

is the 25% not on the market value at the time the hire period ends?

No, its the original value.
http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm

saverdude

It's my understanding that the final payment is now based on a table from hmrc, so for a 1k bike the final payment after 12 months is deemed to be 25% of purchase price , or £250.

Custardy - when did those figures apply? Are they pre 2011?

custardy

saverdude wrote: »

It's my understanding that the final payment is now based on a table from hmrc, so for a 1k bike the final payment after 12 months is deemed to be 25% of purchase price , or £250.

Custardy - when did those figures apply? Are they pre 2011?

those are current as of today

saverdude

jimmo wrote: »

No, its the original value.

Do you know if the 25% is the mandatory amount that employers will charge, or is it possible that it will be less? Scheme seems like its not worth the hassle. I am not going to make any savings of note. The big selling point of this scheme pre 2010 was that you can make huge savings on a new bike. Obviously not the case now. Think the voucher is going back and my 0% credit card will be seeing the cold light of day...

jimmo

Do you realise that salary sacrifice will save you 12% national Insurance as well as the 20% Income Tax?

jimmo

saverdude wrote: »

Do you know if the 25% is the mandatory amount that employers will charge, or is it possible that it will be less? Scheme seems like its not worth the hassle. I am not going to make any savings of note. The big selling point of this scheme pre 2010 was that you can make huge savings on a new bike. Obviously not the case now. Think the voucher is going back and my 0% credit card will be seeing the cold light of day...

The little bit in blue in my earlier post is a link. Click on that and if you work down the page that opens you will find the "Valuation Table".

custardy

saverdude wrote: »

Do you know if the 25% is the mandatory amount that employers will charge, or is it possible that it will be less? Scheme seems like its not worth the hassle. I am not going to make any savings of note. The big selling point of this scheme pre 2010 was that you can make huge savings on a new bike. Obviously not the case now. Think the voucher is going back and my 0% credit card will be seeing the cold light of day...

I remember reading about those changes way back
I thought it wouldnt be worth it but the RM figures at least make it a good deal still

Mrs_Arcanum

You can opt to keep paying a reduced amount the following year & still benefit from the reduced tax & NI.

Finished paying for mine in May and paid no more than the purchase price.

jimmo

The way I read custardy's quote in post #2 is that when a Royal mail employee gets a new bike under their scheme there is a £35 delivery charge. Fair enough, but when the rental period ends there is another £35 charge but that is for collection, presumably by Royal Mail and disposal, presumably by Royal Mail.
There is nothing I can see to indicate how much the Royal Mail employee would need to pay to actually buy the bike at the end of the hire agreement.