You know you want to buy a bike, you are just unsure about how to fund buying a new one. What if we told you there was a way you could save up to 42% on the cost of your new bike and accessories? Then if we added that you can also have what amounts to a 0% finance deal to fund the rest and all with no upfront deposit? It sounds almost too good to be true but that is what a Cycle to Work scheme is in its purest form.
How Then Does Cycle to Work Function?
To start with you will need to be employed by a company that participates in a Cycle to Work scheme, if your work does not participate we have included a list for you to take to your employer so that they can see the error of their ways.
Once your employer has signed up, they will then be able to purchase a bike for you to cycle to work on. You then agree to lease it from your work and at the end of your lease period you buy the bike from your employer. This seems nice and straightforward but it does not explain how you save any money.
Your lease will be paid for through a salary sacrifice. The saving will come from your gross salary and not your net salary. This means you will be making income tax and National Insurance savings. The savings made here are what makes the savings on your bike's cost.
At the end of your lease period, your employer will still own the bike. This is something that neither of you really want. Now your employer can sell you the bike. This can not happen during the lease period as the salary sacrifice period must finish first. You can now buy your bike legally, your employer will also now have depreciated the value of the bike. This should mean the payment is not a big payment.
This price will be dictated by the HMRC guidelines on Fair Market Value. This rule never used to be applied as most employers found it to not be worth the effort of sorting out. HMRC then decided that this may be a tax loophole so now your employer will have to carry out the procedure.
The fee will be around 18 to 25 percent of the value of the bike, the value of your certificate. It may therefore then not be the retail price of the bike. If you do not want to pay a final transaction you can hand the bike back or some schemes will allow you to now pay a small deposit to hire the bike for a further 3 years. 3 years will allow the bike to have depreciated in value to zero cost.
How Much Can I Spend on a Cycle to Work Scheme?
There are two maximum amounts you can spend. It all depends on whether your employer is FSA regulated and holds a Consumer Credit License. Without the license, the maximum you can use on a voucher is £1000 and with the license, the amount you can spend is £4,500. Some schemes will allow you to top up above the voucher but you can not make any savings on the top up. Check if you can do this with your scheme if you have a slightly more expensive taste.
If you top up you will have to pay the total above the voucher before your bicycle can be dispatched. You will then still have to pay the voucher value back through your salary sacrifice.
Can I Ride My Bike On Days Off?
Yes. The idea of the scheme is to ‘promote healthier journeys to work and reduce environmental pollution’, this means as long as you occasionally commute on the bike you will not be getting in any trouble for using the bike to escape your urban environs on days off.
Can I still take a bus to work?
Yes, you can. The scheme is designed to promote healthier lifestyle but it implements no obligations. You can still choose to use public transport if you like, but you probably won't.
Employer Cycle to Work Benefits
- Lower National Insurance contributions, save up to 13.8%
- Fitter staff, meaning less sick days
- Happier staff, meaning more productive work days
- It can attract new recruits
- Staff retention, staff do not leave whilst using the scheme
- Low-cost implementation, it may even have zero cost
- List the bikes purchased as capital expenditure, you can then use capital allowances
- Use the CO2 offset by bike journeys to prove your corporate responsibility
Cycle to Work Schemes We Accept
Schemes we work with are subject to change. Do let us know if your employer has registered with another scheme.
If you want to know about Cycle to Work schemes please click on the blue 'Messge Us' button to your right.
Is your employer registered and you would like to apply? Then click this link here.