Feature

Tue 23 Sep, 3:00 pm BST

Buyer's guide to UK tax free bike schemes

By BikeRadar

Bicycle commuting is on the increase thanks to rising fuel prices, forcing people to consider alternative methods of transport. In the UK, many companies are adopting tax-free bike schemes to encourage their employees to ride to work, cutting their commuting time and costs as well as helping them to become fitter, happier and more productive.

We’ve put this guide together for employees who are sometimes overwhelmed with the information relating to the various plans out there.

We know many people work for companies who are affiliated with particular schemes, so below we have an overview of tax-free cycle to work schemes in general, then we look more closely at each of them.

The cycle to work scheme came about as a result of the government’s Green Transport Plan and aims to help the environment and promote healthier journeys to work by encouraging employers to offer their employees a big discount on new bikes.

Large or small companies can apply, whether in the public, private or voluntary sectors, although self-employed people are better off buying a bike as a business expense. Any firm can set up and administer their own scheme.

How it works

Your employer buys the bike and ‘hires’ it to you until you’ve paid it off. You pay the full retail price of the bike through monthly instalments (salary sacrifice) taken out of your pre-tax and National Insurance pay. So there’s no Income Tax or National Insurance taken out on those payments. This translates to almost 50 per cent off a brand new bike, paid for over 12 months usually.

How good a bargain is it?

The tax band you’re on will have some effect, with higher tax payers saving more than standard rate payers. If the company needs to take out a loan to fund the scheme it will reduce how much each individual saves because you’ll be paying towards the interest.

A further condition is whether the employer decides to keep the VAT saving, which can help pay for the scheme, or pass it on. Some companies return all their savings to the employee, but not all of them do this.

When can I apply?

Your company will advertise the scheme and tell you the date all applications need to be made by.

Who owns the bike?

Until the hire period is finished, the employer owns the bike.

What’s the most I can spend?

Generally there’s a £1000 limit, but it’s up to the individual company. We know of one company who limit the spend at £6000. You can purchase cycling safety accessories too as part of the deal.

What else can I buy apart from the bike?

  • Cycle helmets which conform to European standard EN 1078
  • Bells and bulb horns
  • Lights, including dynamo packs
  • Mirrors and mudguards
  • Cycle clips and dress guards
  • Panniers, luggage carriers and straps
  • Locks and chains
  • Pumps, puncture repair kits, cycle tool kits and tyre sealant
  • Reflective clothing along with white front reflectors and spoke reflectors

Only one bike?

No, you may want a bike, for example, at each end of a train journey. Provided you use the bikes for commuting to work, it’s fine.

Can the employee pay back the employer in full rather than in monthly instalments?

No, the system works by monthly deductions from your pay slip.

What if the bike is stolen or damaged?

You must continue to pay for it as usual. So it’s advisable to get insurance.

What if I leave my job?

You must pay your employer the balance of the amount still to pay, which will not be VAT and tax free since you are leaving the scheme.

Can I add my own cash to the letter of collection?

No

What bikes can Halfords order in?

They will try to order any bike.

Schemes available

Here’s a list of the other companies which run similar tax-free bike schemes. Check the individual sites for bike brands available and the specific scheme details.

Halfords Bikehut - Cycle2Work page

Wiggle - Cycle to work page

Cyclescheme

Evans - Ride2Work page

Edinburgh Bike Co - Bike to work page

LeisureLakes - Cycle to work page

Booost

Example 1 – Halfords Cycle2Work [basic rate tax payer]

Employee lives in city, has a 2 mile commute to work…

Carrera Subway 1  - £199

Actual payment: £126.46

Example 2 – wiggle [higher rate tax payer]

Employee has a 20 mile commute to work on and off-road…

Focus Mares Disc - £900

Actual payment: £451.91

Example 3 – CycleScheme [basic rate tax payer]

Off road commute

Specialized FSR XC - £1000

Actual payment: £587.23

User Comments

There are 15 comments on this post

Showing 1 - 15 of 15 comments

  • Don't forget the Fair Market Value payment at the end of the scheme - this varies greatly between employers (in my case 10% not tax free!!) and also be aware that not all companies can claim back the VAT.

    The tax office has also started to clamp down on the £1000 limit stopping you from adding to this (this causes problems with the ownership of the bike).

    Visit the forums is not as cut and dry as you might think, most schemes will only supply bikes as full retail price.

  • Dead keen for a new bike - my FS trail bike ain't too suitable for a 40 mile round trip, and I don't like to leave it out of my sight!

    However I've heard it from a few sources (OP refers to this too, thanks dsmiff) that you can only get a bike at its full retail price. Can anyone confirm or deny this?

    Having checked FAQs at all the posted links, there's no mention of the above. Evidently it's not a particularly FAQ!

    For example: I'm looking at a bike going for £320 as opposed to £499 retail. That's a saving of about 36% already. I'm pretty much 'cash waiting', and would like the option to leave my current employer without penalty : ).

    Is it worth it?

    I guess I'll try to find the forums dsmiff is talking about now!

  • Don't forget though, as far as I am aware you don't have to buy the bike through a scheme. Your company can handle the paper work entirely independently. This means you can get your bike anywhere you like at any price.

  • A word of warning to those civilians who work for the MOD. You will not be able to take part in this scheme, no matter how laudable it is and no matter that the other millions who work for the Govt can take part. Isn't it great to be special! In spite of the fact that another Govt dept came up with this (DOTR), the MOD claims it cannot take part because it cannot claim back the VAT! A typically disingenuous response to a Ministry chock full of chair warming nomarks. Annual budget of 37-1 billion and yet....! What is more disturbing the call centre that is our HR dept did not know about this and even more disturbing is the Civil Service Sports rep AND his deputy did not know about it.

    There is a scheme whereby you can ask for a salary advance up to £500 that is deducted from your NET salary and only payable over 12 months. Pretty tame compared to this scheme which is far better more flexible and tax friendly. There are moves to increase the limit and now I have to wait for consultation with the TUs - bloddy hell! It makes me ashamed to be a civvie.

  • dsmiff - it is not the schemes that supply at full retail price, its because the schemes charge the bike shop a commission(10%), therefore some, though not all shops, won't offer sale or discounted prices, or some charge the customer a premium (Ribble charge £50, Spa Cycles add 12.5% to their web prices). Those schemes run by the vendors (Wiggle, Evans etc) obviously don't charge themselves commission, so you get the bike at the advertised price. Of course the best solution is for the employer to not use a scheme, just do it themselves (which is perfectly acceptable, and the paperwork is easily customised using downloadable forms from existing schemes websites) then employees can buy any bike anywhere at the same price as any other punter.

  • Tackleberry, i know how you feel, i work for HMRC, and after 7 years of consultation they have decided not to run this scheme because it will cost them to much.

  • I work for royal mail and we are limited to £500. I will pay this back at around £6 per week for 18 months, although as this will come off my top line I will only actually be paying back around £2.50-£3 from mytake home pay.

    while this is not ideal (dont get much bike for £500) it is still very much worth it as you will be getting a brand new bike of your choice, within obvious limits, for around 50% of its retail value. there are very few downsides to this scheme. even if your employer asks for a one off fee at the end of the hire agreement (most dont incidentally) it will usually be a nominal fee of no more than around £30.

    So, you have bought a brand new bike for £500 and have paid it off at a rate of 0% interest over 12-18 months and at the end of that period the very most you will have paid is £300 and ownership of the bike will be revert to you. if you think this is unfair then show me another hire purchase scheme that offers such good rates.

  • oh, and as part of the deal you get to buy and keep up to £75 of the letter of collection when you spend it on accessories.

    I bought a sale price carrera banshee (full sus), some new gloves, a waterproof jacket, a couple of inner tubes and a pump. all for £250.

    how anybody can find reason to complain with this scheme is absolutely beyond me.

  • Hi the fair market value purchase price at the end of the hire period is suggested to be in the reigion of 5% of the original VOUCHER value, as stated on the ride to work website. Do not get conned by your companys accountant!.

    I purchased mine from Evans cycles, despite what people may think of them my experience was good. I had a voucher for 1K and paid the remainder in cash. note i bought a sale bike, other less accomodating companies that shall not be named will not let you have a sale bike!.

  • How about a centrally administered scheme, provided by national cycling bodies like CTC, for those of us who work for companies who do not want to help out their employees?

  • Hi I have just come across this.

    Is this one of those too good to be true schemes?

    And how wouldi go about getting my employer (Local government) to take part in the scheme?

  • I got a bike on the cycle to work scheme in March 08. It ends in Nov when I can again signup to the scheme again. You can add cash to the voucher (my voucher was only for £970 but my bike was £1000) (The bike I chose was no longer in stock))

  • I've bought two bikes on Cyclescheme and until recently would have agreed that it's a brilliant programme. But my current bike is poorly made and has been in the shop for repairs so many times, I finally started asking for a refund. After months of no response from the management, I filed suit in small claims court. The shop's defense is that the bike doesn't belong to me Seems like a flimsy excuse for bad customer service to me.

  • i haven't gone through with it yet was going to get giant trance 5 but not sure wether i'm going to like the bike yet as i can't find one to ride, have also thought of going through the normal interest free finance deal's and getting something better like the trek fuel 8 for £1700, i weight 20 stones and still go out and do 15+ miles on my specialized hardrock 07 but want the comfort of full suspension any advice is great advice.

  • we are pedda bicycle trading company and we mainly export all kinds of bicycle parts.Like brake,fork,frame,hub,BB,head set,crankset,chain,pedal,saddle,bar,stem,post and so on.If you interested in any of them ,then feel free to contact us.

    http://cid-ee6e4ba92e5b1377.skydrive.live.com/browse.aspx/products

    email:bicyclekenny@gmail.com

    MSN:huodai_chan@hotmail.com

    mobile:8615915751660

  • 1

Post comment:

You need to login or register to post comments.

Also on BikeRadar