3rd August is Cycle to Work day. Do you offer a Cycle to Work scheme?
As we recognise Cycle to Work day, below is some information relating to the Cycle to Work scheme which is a great way for UK cyclists to save at least 32% off the cost of a bike and cycling equipment.
It has been used by more than 1.6 million commuters working for 40,000 different employers since it was introduced by the government in 1999 to “promote healthier journeys to work and reduce environmental pollution”.
How does the Cycle to Work scheme work?
The employer buys a bike for their employee to ride to work and the employee ‘hires” it through salary sacrifice, saving tax and National Insurance contributions on the monthly fees. At the end of the ‘hire’ period, the employee is offered the option to buy the bike from the employer. In practice the employee is ‘buying’ the bike, but that isn’t legally the case until the salary sacrifice ends and the employer ‘sells’ the now heavily depreciated equipment to the employee.
For a basic rate taxpayer, the saving on the purchase of the bike will amount to 32% of the purchase price. For a higher-rate taxpayer that increases to 42%. In order to buy the bike at the end of the term, under HMRC rules, the employee will need to make a one-off payment to the scheme provider. The value of this will depend on how long the employee been using the bike and its initial value, and is based on a sliding scale. If the employee leaves the employer while the initial Cycle to Work salary sacrifice agreement is still in force, they will have to pay off the balance if they want to keep it.
There are many organisations which will support employers to set up a scheme – maybe its time to think about it for your business!