Understanding cycle to work schemes and how much you can save

With the end of the financial year approaching it's a great time to think about buying a bike or e-bike through one of the cycle to work schemes. The schemes let you save up to 47%* off the cost of your bike and accessories such as a lock and helmet. Even better, cycling to work means you'll save on fuel and car servicing costs. Plus, you'll be fitter and making a significant contribution to reducing CO2 levels. In fact, cycling to work produces less CO2 than walking. Here's how cycle schemes work.

Cycle to work schemes are a form of salary sacrifice. This means you exchange an amount of your salary before tax in return for a benefit. In this case the benefit is a bike or e-bike that your employer purchases and you hire from them for a fixed period of between 12 and 48 months. At the end of the hire period your employer still owns the bike but can sell it to you at "fair market price". This could be up to 25% of the cost of the bike and any accessories.

How does this save me money?

You save money because you pay less tax since you are 'sacrificing' some of your salary. If your gross salary is £1,500 and you sacrifice £100 per month then you will pay PAYE (Income Tax) and National Insurance on £1,400 instead of £1,500.

How does this save my employer money?

Your employer also has to pay National Insurance Contributions based on your earnings. So their contribution is also based on the £1,400 in the example above, saving them money. Since you repay the cost of the bike over the hire period it doesn't cost them anything in the long term.

How much can I save?

The exact amount you save will depend on how much tax you pay (standard rate or higher rate) and the cost of your bike and accessories. As an example, if the cost of your bike and accessories is £1,500 and you earn the national average of £25,000 per year, your monthly salary sacrifice would be £125, you would save £450 in Income Tax and National Insurance. The fee to own the bike at the end of 12 months would be £105. In total you would save 23% off the cost of your bike and accessories. Use these online calculators to work out the savings specific to you:

greencommuteinitiative.uk calculator

cyclescheme.co.uk calculator

bike2workscheme.co.uk calculator

Who is eligible for cycle schemes?

Cycle schemes are open to anyone who pay tax on a Pay as You Earn (PAYE) basis. If you are a freelancer, work on a 'gig' basis, or are self-employed then you aren't eligible. The amount you sacrifice must not take your earning below the National Minimum Wage.

How do I take advantage of these schemes?

The first step is to ask your employer if they are a member of any of the schemes. If they aren't then forward the links below to your employer's HR department so they can read about the benefits of joining a scheme:

Green Commute Initiative benefits for employers

Cycle Scheme benefits for employers

Bike 2 Work Scheme benefits for employers

If your employer does belong to a scheme they will take you through applying for a voucher. Once you have your voucher you simply use that to pay for the bike and accessories.

At iCycle Ltd we are members of the major cycle to work schemes and are happy to help you choose the best bike and accessories for your needs. If you are thinking about buying an electric bike then we offer free 24 hour test rides before you buy. Feel free to call in to try out some bikes or if you have any questions call us on 01772 347 927 or 01200 442 306.

* Source: Green Commute Initiative.

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