I want to ask a question regarding the Cycle2Work scheme

onlyjokering

I home this finds the right part of the site.

I've been looking into the Cycle2Work scheme, and it looks beneficial, but my question is not about how it works as such. 

Why do people that earn more get more off the price of the bike? To me it seems like the rich helping the rich. 

Any light shed on this matter would be great, I'm just confused as to why.

Alderbank

Normally your employer has to deduct stamp and income tax from your earnings before paying you what's left.

Cycle2work is a sort of (legal) tax dodge in which you pay for the bike before deductions of stamp and tax. So if you pay the standard rate of tax you have about 20% extra to spend. If you pay higher rate of tax you'll have about 40% extra.

Many people who pay some higher rate tax would be surprised to be described as 'rich'!

QrizB

The bike belongs to your employer.

They lease it to you.

The lease payments are deducted from your salary before income tax or NI.

People who would otherwise pay higher rates of tax see a smaller reduction in their take-home than people who pay lower rates.

itsthelittlethings

You pay for the bike before tax is taken off your salary, so, if you are on a 25k salary and you buy a £500 bike, you only "earn" 24.5k, saving paying £100 tax. That's effectively a £500 bike for £400.