Cycle to work salary sacrifice

shaddzzuk

So last year I got a bike on cycle to work salary sacrifice. I pay £100 a month for this i had £1000 to spend on a bike of my choice which was great and the bike is amazing.
It is now coming to the end of the term of 12 months and reading up it is saying that i have to pay "fair market value'" for the bike on top of what I have already paid which is around the £250 figure so for a bike that was £1000 i am going to end up paying £1450 for or give it back to them.
Now i understood that there would be interest on the bike which is why I expected it was £100 for 12 months this would mean they got £1200 for the period giving them a interest of £200.
This to me seems like it is praying on people who can't afford to buy thing outright then saying pay up or give back once you are already quite a way over the amount initially borrowed.

Just thought i would see if anyone else had an opinion on this or had any experience with it.

marliepanda

From reading up on the scheme briefly it seems that you’re not actually buying the bike but loaning it tax free? And if you want the bike yourself you have to pay the market value at the end.

It seems to suggest that employers are encouraged to let you use it free after the initial term, but not required to and I assume it also means if you leave the bike isn’t yours.

It’s not how I thought the scheme worked (I thought you were buying it as well) but I guess it’s a bit like a company car, but a bike?

Lioness_Twinkletoes

Are you sure you've got the figures correct? From the Cycle Scheme website, it states you'll pay a maximum of £70 on a loan of £1,000 and the bike will remain on hire for 36 months with no further payments. This means you'll have paid £1,270 in total - but of course, you'll have saved on tax.

Caz3121

shaddzzuk wrote: »

i am going to end up paying £1450

does the £100 per month not come off the gross meaning you save either £240 or £480 in tax in year?

BoGoF

As Caz3121 says, if you didnt do the salary sacrifice that £100 would have been taxed so you would only have received £80 or £60 in your hand depending on your tax rate. You may also have paid less NIC as a result of the sacrifice so potentially another 11.5% (ish) saving.

animalhouse

Hi, I bought a bike through salary sacrifice and at the end of the year had to pay £70, as the 'market value' of the bike, which had originally cost £800.00. I went to my local cycle store and got them to value it, then gave the valuation to my (NHS) employer who didn't question it.

animalhouse

Sorry, should have said that my employer's original valuation was £200, so it might be worth arguing that your bike isn't worth so much (sorry boss but I don't have a shed so it's been outside all year...I fell off and one of the wheels is a bit buckled - both true in fact).

warehouse

I'm a keen cyclist but have never taken up the cycle to work scheme for the exact reasons in post 1. It's a scam.

RichardD1970

I was told up front that at the end of the agreement I would have to pay £70 based on using the full £1000 allowance.

It's all in black and white on the website.

https://www.cyclescheme.co.uk/help/faqs/end-of-hire

I pay £20ish from my weekly gross pay so about £14 net for 52 weeks so it ends up actually costing me around £800.

takman

This is what put me off joining the scheme aswell. When reading the contract I noticed that you never owned the bike and you had to "buy" it at the end. Which actually surprised some people who were already on the scheme and didn't read the paperwork.

Although to buy it they have to pay 1 extra monthly payment and their is no interest charged on our plans (Which I thought was the norm), so it's still not a bad deal if your planning on getting a new bike anyway.

vacheron

I am a keen cyclist who loves salary sacrifice tax breaks and was also shopping for a new bike when we were offered it at work last year so this was almost perfect for me in principle.

From my calculations the system works "ok"... especially if you are a higher rate taxpayer, and don't have the cash for the bike up front, but the recent introduction of the "fair market value" especially on bikes over £500 makes the benefits marginal at best.

Prior to this the bikes were usually sold for a nominal payment of a few quid, or just given to the employee (but again if given to the employee officilally this would constitute a "benefit in kind" and you would be obliged to pay tax on the fair market value.

For a £500+ bike you only save about £17% as a high rate taxpayer, and just 7% if you are basic rate.

I think the unspoken rule is that the company probably may not be bothered to chase you for the remaining payment which does make it a much better deal, but this can't be guaranteed. There are also a bunch of tricks that can be used to extend the hire for a couple of extra years for a small cost which allows the bike to depreciate further before you buy it at a lesser value.

In the end I bought a brand new... and far better, bike from eBay with my net pay and saved over £60% instead. :money:

In summary, it's OK, but nowhere near as good as it used to be.