The Cycle to Work scheme is a salary sacrifice benefit, delivering employees with cost savings on bicycles and various cycling gear. This scheme allows employees to exchange a portion of their salary for specific benefits. Rather than receiving their full salary, employees opt to forego a portion, which is then used to fund acquiring a bike and associated equipment.
Through the salary sacrifice method, employees reduce the portion of their income subject to taxation. Instead of earning the total salary, paying taxes, and subsequently buying a bike, the Cycle to Work scheme enables individuals to lower the taxable portion of their income by renouncing a segment of their salary before the tax is applied.
Since the salary sacrifice is deducted from the gross salary before tax calculations, employees pay less Income Tax and pay less to National Insurance Contributions (NIC). Furthermore, this arrangement leads to a reduction in the employer’s NIC obligations.
To clarify, consider the prominent Cycle to Work scheme in the UK, such as Cyclescheme. Through this plan, employees can enjoy significant savings ranging from 25% to 39% on the cost of a new bicycle and related accessories.
What advantages does the Cycle to Work scheme offer?
Beyond the savings in National Insurance Contributions (NIC) and taxes, with potential discounts of up to 39% on new bicycles and cycling fixtures, Cyclescheme allows employees to spread the cost interest-free from their salary, offering various ownership options.
The financial benefits encompass further, with an estimated annual saving of £100 for employees commuting three miles daily, achieved by opting for a bike over a car. Participants enjoy complimentary 14-day bike insurance, free access to Love to Ride—an advocacy platform for cycling enthusiasts—and the opportunity to explore offerings from over 2,600 retailers throughout the UK.
Employers also stand to gain from this plan. Cyclescheme simplifies the ownership process, reducing administrative costs and time. Moreover, businesses can realise up to 13.8% savings in Employer National Insurance Contributions.
What does the Cycle to Work scheme encompass?
Cyclescheme provides employees access to various solutions to ensure secure and efficient commuting. This includes:
- Bicycles, tires, components (such as brake levers and groupsets), lights, frames, child seats, and cycle trailers.
- Safety gear includes cycle helmets, cycle clips, bulb horns, dress guards, and bike reflectors.
- Cycle clothing, encompassing reflective apparel.
- Secure bike storage tools, such as bike locks.
- Bike maintenance items, including cycle tool kits and bike lube.
Are e-bikes available through the Cycle to Work scheme?
Absolutely. Recognising the increasing popularity of electric bikes, Cyclescheme includes electric bikes in its offerings. This extends to e-bike conversion kits, road bikes, touring bikes, mountain bikes, and adaptations like recumbents and hand cycles.
Can employees acquire more than one bike through the Cycle to Work scheme?
Yes, the flexibility of the Cyclescheme allows employees to opt for multiple bikes to cater to their commuting needs. For instance, a popular choice is to select a hybrid bike for local commuting and a folding bike for inner-city trips. It’s important to note that both bikes must be for the employee’s use in commuting and must be acquired from the same retailer.
What are the drawbacks of cycle-to-work schemes?
Additional Monthly Expenses:
Participating in a bike-to-work scheme entails a commitment to paying a bit extra each month for a new bicycle. Unfortunately, this may challenge some individuals, with essential expenses taking precedence. However, many schemes offer budget-friendly bike options for those looking to participate with a lower budget.
Like other salary sacrifice programs, certain employees may find joining difficult if their salary is too low. As these schemes deduct a portion of monthly pay, individuals earning less than the minimum wage might fall below the required threshold, making them ineligible for cycle to work or any other salary sacrifice scheme.
Lifestyle Adjustments:
This scheme constitutes a significant commitment, requiring employees to alter their commuting habits and cycle daily. This may seem daunting to some, especially those who find enjoyment or productivity in their current commute. However, the scheme can be beneficial for individuals seeking a change in routine and commuting habits.
Ownership Considerations:
The bike acquired through the cycle-to-work scheme is essentially on loan during the payment period. Employees do not own the bike until the scheme’s conclusion. While this arrangement may deter some, it’s important to note that employees can gain ownership of the bike at the scheme’s end by paying an ownership fee. This fee ensures that employees won’t be subject to any benefit-in-kind tax on their bikes, providing a pathway to full ownership.
Our philosophy at Pogo Cycles is quality, performance, and customer satisfaction. Each bicycle undergoes meticulous scrutiny to meet the highest standards of craftsmanship and durability.