Last Updated on 21 April 2023 by Stefano
Everything you need to know about the cycle-to-work scheme is provided here.
Summer is quickly approaching, and you could be daydreaming about warm mornings spent on a brand-new bike, hurtling down backroads at breakneck speeds beneath a sky full of blue. Or perhaps you’re thinking about adding one more bike to your collection, something perhaps better suited to weekends spent exploring the mountain routes.
In either case, the cycle-to-work scheme is a great method to fund your desire for a new bike.
The UK government’s cycle-to-work scheme, which has been in existence since 1999 and has aided over a million UK workers, is probably familiar to you. Its goal is to get people moving and cut down on travel-related carbon emissions. It’s also important to note that there are a number of different programmes that are occasionally referred to as “cycle to work” schemes. To be clear, the focus of this piece is the cycle-to-work scheme itself.
It enables you to buy a bike through your company, including electric bikes or cargo cycles, and any necessary accessories, spreading the cost over a number of monthly tax-free payments. For those who pay basic-rate taxes, you can save up to around 32% of the bike’s cost, and higher-rate taxpayers can save even more, making it a very affordable choice for anyone who wants to cycle more frequently.
We’ve put together a thorough primer on how to start using the cycle-to-work scheme.
What is the operation of the cycle-to-work scheme?
The cycle-to-work scheme functions fairly simply by having you rent a bike that your employer has purchased and paying it back over an agreed-upon period of time in equal monthly instalments. After this time has passed, you will have the choice to settle any remaining debt in order to truly ‘own’ the bike. The cycle-to-work scheme is essentially a salary sacrifice; you forego a percentage of your income in exchange for the use of the bicycle.
The minimum salary sacrifice term is typically 12 months, while some employers and plans also provide 36 or 48-month choices. The plan, your company, and your personal employment situation will all have a significant impact on how long you can spread out your monthly contributions.
Because the monthly payments are deducted from your gross pay, your tax and national insurance will be calculated on your wage minus the cost of the bike (and any accessories you’ve added), making the programme exceptionally cost-effective. As a result, you are decreasing your taxable income, which ultimately results in lower overall taxation during the hiring period.
Is the cycle to work scheme subject to a maximum?
Do you have a certain thing in mind?
The inaugural cycle-to-work scheme included a maximum allowance of £1,000 for any bike, including one of the top road bike helmets, locks, or lights (among other equipment). Over the previous 20 years, there have been several changes, and the top limit has been eliminated. Instead, some workplaces impose internal limitations on the amount you can spend as well as the kinds of bicycles and accessories that are acceptable for the cycle-to-work scheme.
Similar to how there is no upper limit on the cycle-to-work scheme, there is also no minimum purchase requirement, so you are mostly free to choose the bike that is ideal for you.
The sole restriction is that GoPros and other action cameras cannot be purchased under the cycle-to-work scheme. Other than that, the programme offers free access to anything you would need for riding to work, such as pedals, lights, pumps, bells, a new groupset, panniers, kid safety seats, mirrors and clips, mudguards, and luggage racks. Even without a bike, you can purchase the accessories separately.
How do I purchase a bike under the cycle to work scheme?
You’ll ask the bike store to create an itemised “package” for you after you’ve chosen the bike you want to buy, taken it for a few test rides, and determined which accessories you want. After submitting this to your company or cycling programme, you will receive an electronic certificate for the amount specified. Then, with your voucher in hand, you’ll go back to the store to exchange it for your bike and other accessories. Easy! You may be riding away on a brand-new bike in just a few days.
What happens after the cycle-to-work scheme is over?
In order to determine whether the cycle-to-work scheme is right for you and, if so, how long you would like the payback term to last, you must carefully consider what occurs at the program’s conclusion.
After the hiring time has ended, you will probably have three options:
1. Pay your employer the full price in one go to acquire the bike (and accessories).
2. Give the bike and its accessories back to your company, ending your days of cycling to work.
3. Discuss adding another hiring period.
At the end of the hiring time, it’s crucial that you know exactly what your plan and work permit are. You could have to pay at least a tiny percentage of the bike’s “fair market value” at some point because not all financing options will allow refinancing, and because HMRC requires a one-time payment to transfer ownership, you’ll want to avoid any problematic benefit-in-kind tax obligations.
The total cost of the bike and the duration of the hire period will determine how much of a one-time payment is required. According to Cyclescheme’s calculator, a bike that cost £1000 will probably have a final payment of £70 after a 4-year hire period but £250 after a 12-month period. Before making a purchase, you will receive a sample outline, so ask your employer for further information and carefully consider whether the payment will be within your means.
But there are several innovative methods to cut this expense. For example, Cyclescheme will let you pay a small deposit to keep the bike for three years after your rental time is over. You will receive free ownership of the bike when the three years have passed. The advantage of this is that there are no financial repercussions if you change jobs or enrol in further cycle-to-work schemes during this time.
You should also think about how long you want the hiring phase to last if your plan permits it. Remember that until you make the final one-time payment, your employer is the legal owner of the bike and, though it is unlikely, they could ask you to return it. A longer hire period term could first sound alluring because it would need a lesser ownership fee payment at the end.
In light of this, we advise reviewing your workplace policies to determine what happens to bike ownership if you quit your job during the hiring time or to make sure there won’t be any unpleasant surprises if your situation changes. The majority of cycle-to-work schemes allow for early payback, and the eventual cost of the bike is determined by the bike’s age and a few fundamental HMRC standards.
What occurs if my bike from the cycle-to-work scheme is stolen or damaged?
When determining whether to buy a bike through a cycle-to-work scheme, you’ll need to take the cost of insurance into account. Although it is not required, we advise you to take it out.
You will still be responsible for the repayments if your bike is stolen or written off while you are renting it. Providers like Bikmo, Laka or Cycleplan are excellent choices and will provide you with that extra sense of security.
Do I need to bike every day to be eligible for the cycle to work scheme?
It has long been believed that in order to participate in the cycle-to-work scheme, a cyclist must be committed, robust, and able to ride in any condition. Although it is advised by the Department of Transportation that you use your bike for at least 50% of your trips into the office, it is doubtful that anyone will be keeping an eye on you.
The government created the scheme to promote safer, more environmentally friendly modes of transportation and to get more people riding. More schemes are modifying the way they present themselves, implying that anyone can participate in the plan.
You might decide to only ride your bike to work once or twice a week, or perhaps you’re more of a fair-weather rider who looks forward to the warm summer mornings. Or perhaps you’ll keep your bike for family bike rides during long weekends. Your riding habits are not a requirement for eligibility.
The requirements for the cycle-to-work scheme are simple; you must be over 16 years old, make at least the minimum wage after the bike has been paid for, and be paid and taxed under the Pay As You Earn (PAYE) system. Only you may use the bike, you may not enter into an agreement on behalf of any friends or family members, and you may only have one agreement active at any given time. Other than that, anyone can actually use it.
Where can I purchase a bike under the “cycle to work” scheme?
Basically, practically everywhere.
Due to its widespread use, most bicycle stores are happy to assist customers who want to use the cycle-to-work scheme. They’ll be able to explain the procedure to you and assist you in making judgements.
However, you might only be allowed to use your certificate at particular bike shops, depending on the scheme to which your employer has subscribed. Make sure you pay great attention to this before you settle on anything specific. The majority of schemes will identify the stores they partner with on their website, and you’ll have to work within those restrictions to buy your bike. The distinction between the Cyclescheme and Cycle2Work schemes is the most prominent (and the one that causes the most confusion). The latter exclusively collaborates with Halfords, Tredz, and a select few additional providers, whilst the former is a broader, countrywide programme that works with more than 2,000 merchants.
The website for the scheme will make all of this information readily available, and bike shops can typically provide you with a rundown of the providers they collaborate with (which is typically a number of them).
What schemes are offered?
In the UK, there are a number of distinct cycle-to-work schemes, each of which has somewhat different terms and, as was already said, only applies to select retailers. If your employer is large enough, they may also operate and administer their own cycle-to-work programme, which will be governed by their own terms and conditions.
The most well-known schemes include Green Commute Initiative, Bike2Work Programme, and CycleScheme. You might also hear about retailer-specific programmes, such as those offered by Halfords and Evans Cycles. Typically, your employer will choose one over the other based on administrative simplicity and the proximity of participating bike stores.
Talking with your company about enrolling in the programme if they haven’t already would be worthwhile. They may sign up for free, and there are lots of financial and social advantages for employers, not to mention a happier workforce!
What kind of bicycles are offered under the cycle-to-work scheme?
You have a wide range of possibilities at your disposal, from electric mountain bikes to load-bearing cargo bikes and lightweight road cycles. It all depends on your lifestyle and financial situation. It can be thrilling and daunting to shop for a new bike, and it’s easy to wind up with something that looks good rather than performing the best for you and your lifestyle. We’d encourage you to think about what you’re going to want from a bike before jumping into anything.
Consider a cargo bike. Using the cycle-to-work scheme to finance a cargo bike can be the most cost-effective choice if you have a family and want to lessen your reliance on your automobile. Or perhaps you’ve had your eye on an electric bike your entire life?
Perhaps you wish to ride the trails on the weekends with your buddies, in which case you’ll need something more difficult, like the best gravel bikes. It’s doubtful that you’ll find many bikes that are off-limits because all bikes that are approved for the cycle-to-work scheme will be properly marked by the bike maker or store. The main determinants of which make and model works for you will be your money (including any restrictions set by your employer!) and your lifestyle.
The cycle-to-work scheme: Is it worthwhile?
Without a doubt, yes.
One of the most well-liked salary sacrifice options in the UK is cycling to work and for good reason. It makes buying a bike economical and incredibly tax-efficient, allowing you to buy the bike that’s best for you rather than just the cheapest one available. The cycle-to-work scheme has been shown to inspire more people to start cycling.
Since the scheme’s emphasis has shifted from encouraging people to cycle to work to cycling in general, you now have the opportunity to buy the bike you’ll use the most. Research consistently shows that people who participate in the cycle-to-work scheme are more likely to cycle more frequently.
Cycling has several well-known health advantages, and with petrol prices in the UK on the rise, it seems like a good idea to utilise your bike as much as you can. Why are you holding out?