Get a Bike with the Cycle to Work Scheme

If you are in paid employment (PAYE) and your employer is signed up, one of the best ways to buy a nice new bike is through the Cycle to Work Scheme. It basically means that you don’t have to pay any tax on a new bike. That can be a significant saving and the scheme allows you to pay for the bike in monthly installments, direct from your pay packet, with no interest charges.

Basically, you choose your bike and any related safety equipment (helmet, lights etc.) and ride away with it. You don’t have to pay anything up-front and the cost of the bike is ‘sacrificed’ from your salary over a period of time. A key benefit is you don’t pay any tax or National Insurance from the money that’s deducted, which is an extra saving to you.

Here’s an example of how Cycle to Work helped Sally:

Under her employer’s scheme, Sally choose a bike retailing at £450
Her employer reclaimed the VAT – reducing the cost to £383
This amount was met by Sally agreeing to a “salary sacrifice”, so her pay was reduced by £21.28 per month over 18 months
The take-home pay reduction to her was actually only £14.26 because she didn’t pay tax or national insurance on the £21.28 that she sacrificed
At the end of 18 months Sally’s employer offered the ex-loan bike for sale at a fair market value (e.g. £50 – but some employers essentially just give you the bike)
The total cost to Sally was:
- Net salary given up £14.26 x 18 months = £256.68
- Cost to buy the bike at end = £50 (approx.)
- Total cost (68% of retail price) = £306.68*

*This calculation is based on information provided on the BikeHub.co.uk website www.bikehub.co.uk/featured-articles/cycle-to-work-scheme (date of access 6/5/16).

Is your Employer Registered?

The first step is to check if your employer is registered with a Cycle to Work scheme. If your employer is registered they should be able to help you get started.

If they’re not registered – you should encourage them to do so. The evidence shows employers benefit from a more physically active workforce, e.g. that cycles to work. In addition to health and environmental benefits, the scheme is easy to set up and administer. Clear information for employers is provided on the Government’s website and a number of online providers such as (www.cyclescheme.co.uk/employers) make it easy to administer online.

If your employer has concerns about signing up, a simple interim step they should consider is signing up to the Cycle to Work Guarantee. This is a pledge with no binding requirements but it has started some employers on the journey towards being cycle friendly workplaces.

Scheme providers

An internet search will show you a range of providers for the scheme. Some of these are listed below.

The Government website says:

“To promote healthier journeys to work and to reduce environmental pollution, the 1999 Finance Act introduced an annual tax exemption, which allows employers to loan cycles and cyclists’ safety equipment to employees as a tax-free benefit. The exemption was one of a series of measures introduced under the government’s ‘Green transport plan’. The following guidelines clarify how organisations can take advantage of the exemption to implement a cycle to work scheme that encourages employees to cycle to work and allows employers to reap the benefits of a healthier workforce.”

www.gov.uk/government/publications/cycle-to-work-scheme-implementation-guidance (date of access 6/5/16)

More Detailed Information

Bike Radar’s Guide to the scheme:
www.bikeradar.com/gear/article/everything-you-need-to-know-about-the-cycle-to-work-scheme-18360/

10 reasons employers should sign up:
www.personneltoday.com/hr/cycling-to-work-10-reasons-why-employers-should-have-a-cycle-to-work-scheme

Wikipedia also has quite a good summary of the scheme:
https://en.wikipedia.org/wiki/Cycle_to_Work_scheme