In a nutshell: Save money and spread the cost on a new bike and accessories by paying for it via your employer's scheme. Seems simple enough, but is it?
I have tried to simplify it below... but by all means, have a read of the official website. What does it say? "Save 25-39% on a new bike for work
Tax is complicated; the cycle to work scheme is not. You choose a bike, hire it for an agreed length of time, then snap it up for a faction of its original value. It's like a year-round sale, with interest free credit available in over 2,000 retailers nationwide."What does this actually mean?
If your employer is part of the Cyclescheme cycle to work scheme, then you can hire your bike paying monthly instalments. There was a limit of up to £1000 for each agreement, but now you can get more expensive bikes and accessories, depending on your employer’s scheme. For example, e-bikes for those who might need to get up some hills without getting sweaty are now included.
You just need to sign up using your employers details, find a shop that is part of the scheme, and wait for your employer to sign off on the agreement. On the Cyclescheme site:
“Your employer will review your application and pay for your Cyclescheme package. We'll then instantaneously send you an eCertificate.
You can exchange your eCertificate for your gear in-store or online.”
When you have hired the equipment, you will pay the same amount each month which will come out of your paycheque as a salary sacrifice. However, you’ll pay less NI and tax until the 12 months are up to make use of the tax-free element of the scheme. After this, you have three options...1. Give the bike back
You can give the bike back after 12 months, but this offers you no real advantage as you will have been paying to simply rent the bike and accessories. Plus, you will need to return the bike at your own expense. 2. Pay to 'own it now'
You can choose to keep the bike by paying the ‘own it now fee’, which is either 18% or 25% of the bike’s market value. 18% if the bike was initially less than £500, or 25% if it was more than £500. For example, if your chosen package was £600 in total and you are on a wage of £30,000, then you would pay £50 per month for 12 months, which is £600 during the hire period. However because this is before tax, it comes out of your wage directly and feels more like £34 a month (so £408 in total) out of your pocket.
After the 12 months you would need to pay £150 (which is 25% of £600) to own the bike. This works out as you paying £558 of the total £600. 3. Pay to 'own it later'
The cheapest option would be to use the ‘own it later’ agreement, which has the same initial hire costs and time of 12 months. Thereafter, you pay Cyclescheme a refundable deposit of 3% or 7%* of the market value of the bike, to use the bike for another three years with no further monthly instalments taken from your paycheque. *Again the percentage is dependent on if your package was under or over £500.
Then when the three additional years are up, you can either give the bike back and get your deposit back, or keep the bike and Cyclescheme keep the deposit.
Using the earlier example of a £600 agreement, you will have paid £600 toward the bike during the initial 12 months, which again will feel more like £34 a month so £408 in total, then you pay 7% deposit to own the bike after a further three years. 7% of £600 is £42, so in total you will have paid what feels like £450 for the bike.
Cyclescheme then transfers ownership of the bike to you, unless you choose to give it back. CLEAR AS MUD
Note: It will depend on your employers scheme for the exact amount you need to pay as they may have administration fees, you may be in a higher tax bracket than the example above, and if you live in Scotland or Wales you will pay different amounts of tax.
Watch this video to realise it isn’t as opaque as it sounds…Cyclescheme End of Hire Process
from Cyclescheme Ltd
Find out where you can get bikes and equipment on the website, but all of the below are involved:
As ever, read the FAQs thoroughly as it will explain everything you may want to know. Here is a link to the employee questions and answers: help.cyclescheme.co.uk/col…ers
It must be noted that should you leave employment with the company or organisation you set up the scheme with before the initial 12 months hire, then you will not benefit from the tax free aspect of the scheme and the remainder of the fees will be taken from your final NET pay, ie. after tax.
This is considered a termination fee and is non-negotiable. Nor can you transfer the scheme between employers, sadly. READ MORE