What is the cycle to work scheme?

Riding a bike to work can be a great way to fit some exercise into your day, but did you know it can be as good for your wallet as it is for your health?

The Government introduced the ‘Cycle to Work’ scheme in 1999 to encourage employees to use bikes for commuting, reducing the impact of increasing numbers of cars on the roads.

How does it work?

Employers purchase the bikes and equipment from authorised retailers, up to a value of £1,000 for one ‘package’. They then lease them to their employees to be used for commuting. The scheme only applies to purchases made by the employer directly, it does not apply to reimbursed expenses. After the lease period finishes, the employee can choose to give the bike back or purchase it at a reduced rate (usually less than 25% of the purchase price). Some employers may offer a longer term lease.

You can take part in the scheme once every five years, relating to the expected life-cycle of your new bike. You will need to sign a statement that you are going to be using the bike for commuting and not your own use, but you are unlikely to have to provide proof of this.

What can I buy?

You get an allowance of £1,000 which includes the bike and any associated equipment such as a helmet, lock and lights. Most retailers will not restrict you to full price merchandise, so you can take advantage of sales to get more for your money.

Who is eligible?

All employers, including public sector and private companies can run the scheme. All employees within the organisation are eligible to participate in the scheme, although you must be over 18.

If you are self-employed you are not automatically eligible, but you would be if you were ‘employed’ by your own limited company.

If you leave your employment before your initial lease period is finished, you may be liable to pay your employer the balance of the payments due. If you want to keep the bike, you may also need to pay the ‘fair market value’ price to your employer.

What are the benefits?

As an employee, you get to spread the cost of your new bike and equipment over a number of months, usually a year. You also get to save on the amount of tax that you pay. The lease amount you pay your employer is taken off your gross pay amount before tax is calculated. Higher rate tax payers will benefit most from this scheme.

Participating in a Cycle to Work scheme usually means that you’re also eligible for other discounts and promotions offered by the cycling retailers.

As an employer, you make a saving on National Insurance contributions for the relevant employees.

Cycling is proving more and more popular, as roads get busier and options for exercise get more expensive. The Cycle to Work scheme represents a beneficial option for employers and employees, promoting a healthy lifestyle and monthly tax savings.

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5 November 2020

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