We recently spent a day at Lancaster University where staff had the opportunity to try out a range of electric bikes and find out all about the various Cycle to Work Schemes that we are a part of. Cycle to Work Schemes have been around since 1999 with the aim of getting more people cycling to work. Why does the Government want more people cycling to work? Quite simply because as a nation too many people are overweight (or even obese) and not exercising enough. Cycling to work even 2 or 3 days a week has a measurable impact on people's phsyical and mental health, which in turn means less demand on the NHS. Plus, even when you take into account the CO2 produced when charging an electric bike, pedal powered transport hugely reduces our impact on the Environment. It's a win-win for everyone involved. Even your employer.
Cycle to Work Schemes are basically a loan from your employer that allows you to purchase a bike (along with accessories such as lights, helment and lock) so you can cycle to work today rather than after saving up for months to buy your bike. As well as allowing you to 'ride now, pay later' both you and your employer save money on the amount of tax you both pay. Here's an example. Say you are paid £1,000 per month before tax. Your employer purchases a bike and accessories and you enter into an agreement to hire these for a period of 12-18 months. To cover the cost of the hire you agree to a salary sacrifice. Let's say you agree to a salary sacrifice of £100 per month. Now, for the purposes of HRMC you are only earning £900 per month so you will pay less tax and National Insurance. Since your employer also has to pay National Insurance contributions on your behalf they also save money since they will also be taxed on the lower £900 salary. The cost of the bike is also classed as captal expenditure so your employer will pay less Corporation Tax as a result. The more you earn the bigger the savings to be made for all involved.
At the end of the hire period you have the option to take ownership of the bike and accessories. Depending on the particular scheme you use this may involve paying a pre-agreed ownership fee or there may be an automatic transfer of ownership built in to the hire agreement.
There are some, but not many, caveats to Cycle to Work Schemes. They are open to anyone who is classed as an employee and paid through the PAYE system but not the self-employed. However, if you earn the National Minimum Wage sacrificing part of your salary would mean you are being paid below this minimum level so you cannot take part. Similarly, employees under 18 may not be able to agree to a salary sacrifice but they could still be eligible for hiring a bike from their employer without the salary sacrifice. In these cases we're happy to advise you on the different schemes available.
Cycle to Work Schemes are intended for people who are going to cycle to work or as part of their employment. You don't have to make every journey by bike but you are expected to make 50% of journeys by bike. So is it worth it? Beyond the health and environmental benefits mentioned earlier cycling to work is a lot cheaper than travelling by car. Plus, the tax benefits mean that you can save up to 47% off the cost of your bike.
If you'd like to find out more about Cycle to Work Schemes or having a free demo day at your place of work give us a call on 01772 659 292.