Would you benefit from the cycle-to-work scheme?
Our content specialist David Todd fell in love with cycling pretty late in life… by sheer coincidence, it happened at the same time he left hilly Sheffield for the flatlands of rural Lincolnshire.
He now divides his working week between writing content for our clients and selling bikes on the shores of Rutland Water.
Here he explains why it’s never too late to make the switch to two wheels, and why Cycle to Work schemes can be of real benefit to employers and employees alike.
If you ever needed an incentive to get back on a bike, just watch those frightening numbers flashing before your eyes the next time you fill-up the car. Cutting out just a few short trips can save a small fortune over a year… and that’s before you factor in the health benefits.
I’m no cycling evangelist; I do it strictly for pleasure, when the weather’s nice (not too wet, not too windy), and take great care to avoid anything even resembling a hill. But when I’m out there, on my own or more often with my family, I honestly couldn’t put a financial value on how good it makes me feel. That’s one of the true joys of cycling; you don’t need to be good at it to enjoy it.
So whether you’re thinking of buying your first bike for a while, or looking to upgrade, is it worth going down the Cycle to Work route?
The Government programme has been around since 1999, with different cycle to work schemes available, and can offer benefits for both employers and employees. The schemes operate via salary sacrifice, with the employer effectively buying the bike and hiring it to the employee for a fixed period (typically 12-18 months. Deductions then taken from the employee’s gross salary to cover the cost of the bike.
The financial benefit for employees comes because this is taken before Income Tax and National Insurance Contributions (NICs) are deducted, while employers do not pay NICs on the amount deducted.
For the employee, this can add up to a saving of up to 40% (depending on your tax band) on the cost of a bike and accessories. As long as you fully explore the ‘end of hire’ options and consider the implications of ending the agreement if you change jobs, it can make what may be an expensive outlay much more affordable.
When the ‘hire’ period ends you generally have three choices:
1. Return the bike
2. Own it now
Take ownership of the bike and pay a fee based on ‘fair market value’ according to HMRC regulations. For example, you may be asked to pay up to 25% of the value of a bike costing more than £500 after 12 months.
3. Own it later
The most cost-effective option is usually to extend the hire agreement (typically for 36 months) for a single refundable deposit of 3% or 7% (depending on how much the bike cost) with no further monthly payments. At the end of this period you can either choose to send your bike back to your Cycle to Work provider (deposit refunded) or take ownership of the bike. No further payments are needed.
It is also important to note that if an employee leaves or is made redundant during the hire period, they are obliged to pay the remaining salary sacrifice amount in full from net pay.
For the employer, offering such a scheme is not going to cost anything in the long term, other than a small amount of additional admin for the business, and could be seen by potential recruits as a significant employment benefit. It can also improve your employees’ health and fitness levels and reduce absence through illness or stress. As an industry we are always looking for ways to reduce the carbon footprint of our customers; this is a way to cut your own.
Check out some of the approved schemes online and decide if they will work for you or your business. Even if they don’t, many major retailers are offering 0% finance deals, so there’s really no excuse to get out there.