Cycle to Work Scheme
Save up to 50% on your bike purchase through a Bike to work scheme!
What is the Bike to Work Scheme?
The Bike to Work Scheme offers tax incentives that enable your staff to enjoy serious savings on the price of a new bicycle (plus related safety equipment such as a helmet and a set of lights).
Once you sign up for a Bike to Work Scheme in partnership with Alf Jones Cycles, your employees will have the opportunity to lease the bicycle of their choice via a tax-efficient salary sacrifice.
The hire period - typically 12 or 18 months - will be at your discretion.
How It Works - Savings For The Employee
Under a salary sacrifice scheme, the employee agrees to a reduction in pay. In return, the employer provides a non-cash benefit - in this case the use of the bicycle over the hire period.
Salary sacrifice effectively reduces the proportion of the employee's salary that is liable for income tax and National Insurance. Hence the savings, which are best illustrated by a simple example.
The employee chooses a £300 bike to be leased over 12 months.
The employer purchases the bicycle, then leases it back to the employee. The employee therefore agrees a salary sacrifice of £25 a month. Because this £25 comes off the gross pay, the employee's net pay will only be reduced by approximately £17, thanks to the tax and NI savings.
The amount saved is dependent on the employee's personal tax band so he or she could save even more. At the end of the hire period, the employer has the option of transferring ownership of the bicycle to the employee upon payment of a Full Market Value price.
|Basic taxpayer paying 20% tax and 11% NI contribution||Higher taxpayer paying 40% tax and 1% NI contribution|
|Value of cycle||£500.00||£500.00|
|Value of helmet (VAT Free)||£40.00||£40.00|
|Value of accessories||£100.00||£100.00|
|Total value of goods||£640.00||£640.00|
|Total value of vatable goods||£600.00||£600.00|
|VAT saving at 17.5%||£89.36||£89.36|
|Total value of goods to be charged to employee via salary sacrifice||£550.64||£550.64|
|Monthly salary sacrifice from gross pay||£45.89||£45.89|
|Employee tax and NI contribution savings||£170.70||£225.76|
|Employee total savings||£260.06||£315.12|
|Total cost of goods||£379.94||£324.88|
|Monthly salary sacrifice from net (take home) pay||£31.66||£27.07|
This is a simplified chart of how the Cycle to work scheme could work for you. Different companies may employ slightly different procedures as to how they want thier scheme to run. For more information please visit Alf Jones Cycles and we'll be more than happy to explain further.