What is the scheme?
The cycle scheme allows employees to hire a bike and associated equipment tax free. Currently just 3% of UK commuters travel by bicycle to work, according to the UK Department of Transport, one of the lowest figures in Europe. The government hopes the cycle scheme, along with other incentives will help get this figure to 40%.
Who can apply for the tax exemption?
In order to avail of the cycle to work scheme the bicycle and equipment must be purchased by the employer. It is then hired to an employee for 12 months, through salary sacrifice the full cost of the bike and equipment will be paid back to the company over the duration of the hire period. Availing of the cycle scheme means an effective saving of up to 42% on the cost of a new bicycle for a top rate taxpayer.
Who is entitled to use Bike to Work?
Under the initiative, salaried employees who are employed and paying tax in the UK as long as the hire payments do not push the wages below the national minimum wage.
What is a salary sacrifice arrangement and how do I make my savings?
A salary sacrifice happens when an employee gives up the right to receive part of the pay due to them under their contract of employment in return for the employer’s agreement to provide some form of non-cash benefit, in this case the purchase of a bicycle and related equipment. You will make hire payments from your gross – rather than net – salary for the 12 months following the purchase.
Is there any limit on the price of the bike I can obtain?
Yes, there is a limit on the price of the bike, you will only be able to tax relief up to a maximum of £3,000.
What happens if the bike gets stolen before I’ve paid for it?
It will still be down to you (employee) to complete the full payment even if you no longer possess the bike, which means if the bike is stolen the employee will be liable for any outstanding monies without any tax exemptions. It is very important to insure the bike, and any goods fitted to the bike, to safeguard against the losses following theft. You can obtain safety equipment from Bike to Work partnering shops, where you can ask for approved ‘Secure’ D-locks and cable locks to conform to insurance companies requirements.
What cycle-related equipment is tax-allowable under the scheme?
Bells, clips, dress guards, helmets, horns, lights, locks, mirrors, mud guards, panniers and straps, are all included, as are pumps, puncture repair kits, cycle tools, reflectors and reflective clothing. While raingear isn’t covered outright, clothing that is both waterproof and reflective is covered.
How do I go about getting a tax-free bike through Bike to Work?
The scheme is a voucher scheme and you will need to apply for a voucher to redeem against your goods when you go to collect them from a local participating bicycle shop. To obtain your voucher you need to:
- Your company signs up for the scheme.
- Get a Bike to Work Quote from a partner shop.
- Submit your order on biketowork.co.uk
- You'll review and agree to a Salary Sacrifice agreement and a Hire Agreement
- Once the quotation is approved by your HR department Bike to Work will invoice your employer.
- Once payment is made for the bike package by your company we'll email you with instructions on how to get your bike.
- Collect your bike from the shop and get cycling.
Are there any eligibility criteria for employees?
The Scheme is open to all salaried full- and part-time employees.
To take advantage of the tax breaks that result from salary sacrifice please also note: You must be paying PAYE, earn more than the National Minimum Wage after salary sacrifice, and have a contract that does not end during the hire period
What is the payback period?
12 months with a weekly/monthly salary sacrifice.
How many times a week to I have to use the bike for work?
There is no requirement for you to cycle to work for a specified number of days throughout the year and there is no special requirement for you to record your trips. The scheme does ask however that at least 50% of the bikes usage is for traveling, to, from and between work places. You can also use the bike for leisure at weekends and on holiday.
Do I have to keep a record of my commuting mileage?
The Department of Transport does not expect employees to keep a record of mileage.
Is it my responsibility to insure my bike?
Yes, even though you are still paying for your bike through salary sacrifice
What’s the best way to insure the bike?
Household policies are usually much cheaper than specialist policies but you must ensure that the insurer covers the bike when in storage away from your home. You also need to check that there’s no upper limit on a claim (if you have a reasonably expensive bike). If your bike cannot be covered on your home insurance then specialist insurers are available.
Can I get a bike from Bike to Work mail order?
Bike to Work partner shops are capable of supplying bike packages mail order from their shops, under the Government’s green travel plan. However, there are distinct advantages when buying from your local bike shop that will be the first port of call for advice, servicing, after sales and warranty.
Do I need to maintain the bike myself?
You are responsible for maintaining the bike for your own use. Your local shop will be able to advise you about necessary servicing depending on how you use your bike. They are also likely to give your bike a first free service once you have bedded it in.
What happens if I leave my job before I’ve finished paying for my bike?
Under the terms of the hire agreement, the agreement to hire the bike is “non-cancellable”. This means that you will need to settle all outstanding monies before you leave. The outstanding balances will be deducted from your final net salary payment. Settlement will be from net pay because once you leave the employment, you also leave the bike scheme, and are no longer eligible for tax deductions.
How will salary sacrifice affect my pension?
Your pension contributions are payable on your full salary. Consequently, your pension and related benefits are not affected by the sacrifice.
What happens if I go on unpaid leave?
During approved unpaid leave such as maternity leave, the hire agreement period will be extended by the number of months when the salary was not paid and the Employer was not able to collect payments.
And maternity/paternity/parental/sickness leave?
Your reduced income may also have an effect on the following:
During maternity/paternity/parental/adoption leave: you will continue to have the bike and equipment on loan during your absence with your gross salary still at the reduced level according to the salary sacrifice arrangements. You will continue to have deductions made from any payments you are receiving and/or will accrue a debt that will be recovered as soon as you return to work and receive a payment from your employer.
What happens if I am made redundant or my contract is terminated?
If you leave the Employer before the final deduction has been made from your salary you will be obliged to pay the remaining amount in full. What happens if I change my mind after joining the scheme? Under the unique terms of the scheme it is not possible for you to cancel the repayment. You are therefore committed to making the salary sacrifice for the duration of the repayment period. If your employment is terminated during the repayment period you will still be liable to complete payments identified in the repayment agreement. This means that you must be sure you are happy entering the scheme and with the selection you have made.
Is the bike mine straight away?
No, the bike and goods remain the property of the hirer throughout the hire period.
I want to join the scheme – what next?
Visit your local bike retailer and follow the steps set out above to order your voucher.