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The ‘Cycle2Work’ scheme is a tax incentive made possible through the government’s ‘Green Transport Plan’; aimed at encouraging employees to cycle to work thereby reducing air pollution and improving their health.
The scheme allows employees to benefit from a long term loan of bikes and commuting equipment such as lights, locks and panniers completely tax free.
Employers can loan bicycles to their staff as a tax-free benefit on the condition that the bicycles are mainly used to get to and from work or for work-related purposes. You then have the option to purchase the bike at the end of the loan period for the Fair Market Price.
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• Employer signs up for the scheme
• Employee then chooses a bike from www.fleetefficiencystore.co.uk
• Employer buys bike and reclaims the VAT
• Item is delivered and provided to employee to be used as an occasional alternative to commuting
• The VAT free price is then deducted from your salary by equal installments over a period of time (‘salary sacrifice’), but as you don’t pay tax or NI on the income you forego, this will give you further savings
• After the period of salary sacrifice, your employer may give you the option to purchase the bike at a ‘Fair Market Price’ (typically 5% of original package costs). | |
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• You’ll feel fitter and healthier reducing the risks of heart attacks and strokes
• You’ll do your bit for the environment reducing air pollution and congestion
• Save money on transport costs e.g. petrol and fares
• Claim back up to 20p per mile for using bike for business journeys such as going to meetings or visiting other branches
• As the cost is deducted from your gross salary, money that you would have paid in Income tax and National Insurance goes towards your bicycle, making it cheaper than paying for it out of take-home salary
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This funding option is an alternative to Contract Hire where the hirer has the opportunity of paying back the capital cost of the vehicle over a longer period of time. The hirer also has the option to pay a lower rental payment during the contract period and pay a final rental based on the anticipated resale value of the vehicle.
Total Cost of Bike and Accessories
Vat Savings on Bike and Accessories
Net Cost of Bike and Accessories
Income Tax Savings over period
NI savings over Period
Final Cost of Bike and Accessories
Total Saving
Gross Monthly Salary Sacrifice (12 Months)
Net Monthly Salary Sacrifice (12 Months)
Percentage Saving on RRP
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£550.00
£81.91
£468.09
£187.24
£4.68
£276.17
£273.83
£26.01
£15.34
50%
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• Employer signs up for the scheme
• Employee then chooses a bike from www.fleetefficiencystore.co.uk
• Employer buys bike and reclaims the VAT
• Item is delivered and provided to employee to be used as an occasional alternative to commuting
• The VAT free price is then deducted from your salary by equal installments over a period of time (‘salary sacrifice’), but as you don’t pay tax or NI on the income you forego, this will give you further savings
• After the period of salary sacrifice, your employer may give you the option to purchase the bike at a ‘Fair Market Price’ (typically 5% of original package costs). | |
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• Improving Staff health, fitness and morale - An improved health and fitness of workforce will lead to a better performance at work and fewer sick days being taken. Furthermore, the employer is seen to be concerned about employee’s welfare
• Improving Your Company’s Environmental Image - Promoting alternative transport initiatives shows the employer has a keen interest in the well-being of the local community and environment. This will improve the company’s corporate image and levels of corporate social responsibility
• Reducing Parking and Congestion Problems - Introducing a cycle to work scheme will reduce traffic congestion and subsequently pollution on the roads in the surrounding area. Furthermore, fewer allocated spaces will be needed / demanded in the workplace for parking
• Savings to be made for everyone - As there is no financial loss to the employer, all of the above only stand to improve the company’s competitive advantage as an employer and within their market place. Even better, the monthly ‘salary sacrifice’ comes from the employees’ gross salary – which is not subject to Employers National Insurance – employers save money too
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