The Cycle to Work scheme, for which Cyclescheme is the biggest provider, is an ideal way to get a tax-free bike and equipment for commuting. You’ll typically save at least 25%, plus you’ll pay in instalments. It sounds almost too good to be true, and that’s perhaps that’s why non-participants are sometimes sceptical. Here are the answers to ten of the more common misunderstandings.
1. The savings aren’t worth it
Compared to what? Interest-free credit with a retailer who’ll knock 10% off? Nope: you’ll save more with Cyclescheme. You don’t pay income tax or national insurance on the bike as its cost is deduced from your gross salary, saving you 32% (standard rate taxpayers) or 42% (higher rate taxpayers). The misunderstanding may come from the transfer of ownership payment you make to own the bike. After one year you pay 25%* of its value, potentially cutting your savings from 32% to 7%. But if you take out an Extended Use Agreement and ‘hire’ the bike for three more years, the transfer of ownership payment is just 7%*, leaving savings of 25% or more. (*For a bike costing £500 and over; it’s 18% and 3% for cheaper ones.) See what you can save.
2. It’s a hassle to set up
It isn’t. To make an online application for a Cyclescheme certificate, which is what you’ll exchange for your bike and/or equipment, you need: your payroll number, which is on your payslip; your employer code, which is a unique reference number that each Cyclescheme-registered employer has; and a budget for your bike/equipment. Your employer must be registered with Cyclescheme. If they’re not, invite them. Registration takes employers about 10 minutes and they can be up and running the next day.
3. You can only get hybrids, folders, and other commuter bikes
You can also get a road racing bike, a mountain bike, or just about any other kind of bike. Government guidance is that Cycle to Work bikes and equipment should be ‘mainly used’ for cycling to or from work, or between one workplace and another. Mainly means ‘more than 50%’. You don’t have to keep a mileage log, however, and the scheme isn’t policed as such. If you were reported by your employer, the bike and/or equipment would be considered ‘a benefit in kind’ which would incur tax.
4. It takes ages to get your certificate
Cyclescheme eCertificates are emailed to you immediately your application has been approved and paid for by your employer. So the ball’s in their court. Some employers turn it around in a couple of days; for others, it could be six weeks. Some employers use an enrolment window, such as a particular calendar month, and process all applications in one batch afterwards. You can check on the progress of your certificate using your MyCyclescheme account.
5. You can’t spend more than £1,000
In theory, there’s no maximum limit. In practice, most employers can only offer packages up to £1,000 due to the special Cycle to Work consumer credit licence they operate under. Some employers, such as local authorities, banks, and businesses that offer consumer credit, have higher limits. Even when your limit is £1,000, it’s usually possibly to get a more expensive bike by paying the difference to the retailer up front. For a £1,500 e-bike, for example, you’d pay the shop £500, then make the usual Cyclescheme savings on the remaining £1,000.
6. You can’t participate on a low wage
You do have to be earning more than the national minimum wage (NMW). The regulations say you must receive at least the NMW after Cycle to Work deductions. You don’t have to earn much more, however, particularly if your employer is willing to run the scheme over 18, 24 or 36 months rather than 12 months. Let’s say you earn 11p per hour more than the NMW and work 37 hours a week. You could get a Cyclescheme certificate for just over £210 (11 pence times 37 hours times 52 weeks is £211.64) if the deductions are taken over one year, or double that if your employer allows deductions over two years. Cyclescheme can advise your employer on how to arrange this.
7. You can’t participate if you’re self-employed
You can’t if you’re a sole trader. You can if you’re a company director and pay yourself through PAYE. The Cycle to Work scheme operates through salary sacrifice – deductions from your gross salary. That’s only possible if you have a salary, which sole traders don’t.
8. It’s a one-time deal
It isn’t. You can take part year after year; for example, getting a bike in year one, and equipment or a different kind of bike in year two. You can even get two bikes at once or have two Cyclescheme certificates running concurrently. The total Cycle to Work salary deductions can’t exceed your normal limit – typically £1,000 per year. So you could get a £1,000 bike one year and £1,000 worth of kit the next. Or in one year you could get two £500 bikes, one for each end of a train journey, or one £600 certificate, followed by another £400 certificate a few months later.
9. You can only choose what your local shop stocks
Local bike shops generally stock just a few bike brands. The chances are that there will be a bike within those ranges that suits your needs. However, if you have your eye on a bike that the shop doesn’t stock, or simply want to shop elsewhere, you can use your Cyclescheme certificate from your sofa by ordering online. There are more than 2,000 Cyclescheme retailers – including online, click-and-collect, and brand direct. So wherever you are, you can get whatever bike you want.
10. It’s not your bike
It’s true that your employer pays for the bike and that, during the salary sacrifice period, you are hiring the bike from them. However, the bike is very much yours to use and in your care. Once you pay your ownership fee (usually 3 or 7% of its original value) the bike will become yours in due course. Even when you’re ‘hiring’ the bike, it’s yours in the sense that you are responsible for looking after it and insuring it.
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