What
is it?
Cycle to Work is the official name of the government
scheme designed to make bike ownership financially easier
for employees. It can halve the cost of getting a machine.
The rationale is that by offering tax benefits on bike
buying, it aims to minimise traffic on our crowded roads,
cut back on pollution and improve public health.
The scheme first started in 1999 but was known to few.
It was rebranded Cycle to Work last year.
How it
works
At its simplest, Cycle to Work cuts the price of a new
bike in half if you are a higher rate 40% taxpayer and
by just over 40% if you pay income tax at the basic 22%
rate.
If you are a higher rate tax payer for example, and you
choose a bike and accessories worth £500, you enter
into a Hire Agreement with your Employer, who then deducts
payments from your gross salary over a 12 month period.
This is known as a salary sacrifice.
What is salary sacrifice?
Salary sacrifice happens when an employee gives up the
right to receive part of their cash pay due under their
contract of employment in return for a non cash benefit,
which in this case is a cycle and any safety equipment
needed.
The Cycle
Scheme works in saving you money in a few ways.
Firstly, your company buys the bike VAT-free. Secondly,
the bike is paid for over a period of twelve months, with
the money coming directly from your wages. This means
two things: you’re basically getting the bike interest-free
for the length of the term repayments and you are saving
both national insurance and income tax because the payment
comes out before these are calculated and taken.
Bike & accessories cost (including VAT) £500
.00
V.A.T. saving £74 .47
TAX & National Insurance saving £147 .36
12 Monthly repayments (salary sacrifice) £20 .93
Total cost £251 .16
SAVING AROUND 50% OFF RRP £248 .84
The above example for a higher rate taxpayer shows savings
of over 50%, a standard rate (22%) taxpayer would pay
£285.13, saving around 43%.
Although the repayments may look higher than you expected
and total more than you expected to save over the course
of the year, the savings
calculator is actually pretty accurate. If you
calculate your net pay sacrifice over the term of your
repayments, the total is more or less the same as on the
savings
calculator because you’re paying less tax
over the year.
Who does the bike belong to at the end
of the 12 month period?
For a nominal sum (usually 5% of retail value) the bike
and safety equipment can be purchased from the Company
at the end of the Hire period.
What if I leave before the end of the
Agreement?
If you leave during the term, any outstanding monies
owed should be taken from your final Net salary, however
if this is not sufficient to cover monies owed, you will
be required to pay your employer any outstanding money
by cheque / cash within a specified period.
Is there a price limit that can be spent?
Under this Initiative the Goverment has provided a blanket
Consumer Credit Licence to all participaitating Companies,
allowing purchases for any one individual up to £1000.
How do I take part in the scheme?
Once your Employer has signed up to the Workcycle scheme,
getting a cycle and saving money couldn’t be easier.
Simply choose your cycle and safety equipment and complete
the online quotation form.Send or hand the form to your
employer
You then sign a written Hire Agreement for 12 months with
Your employer specifying the salary sacrifice to be made.
This is regulated by the Consumer Credit Act 1974, and
is non cancellable.
Once payment has been made by the employer, Team Hybrid
will contact you when the cycle is ready to collect.
Deductions are then made from your gross salary by your
employer over a 12 month period.
Opting in to the Cycle
Scheme is a fairly easy process (at least for
you as the employee). Just ask
your employer to sign up for the scheme, you can then
purchase a bike of your choice from us.
Employers benefit from fitter, more punctual,
more wide-awake staff. Employees benefit from better health
and better bikes because their money goes further.
For more information visit this site
www.cyclescheme.co.uk.
