What is Cycle to Work?
Cycle to Work is a government based incentive, designed to entice more commuters out of their cars and onto bicycles. It also allows you to purchase a lovely new bicycle and make considerable savings into the bargain.
How much can I save?
- As an employee you can make a saving of between 25-39% (dependent upon the rate of tax you pay) of the total value of the bike and any accessories up to the value of £1000. This £1000 limit has now been relaxed for electric bikes so speak to your employers scheme administrator for more information. Some employers may even have a consumer credit licence which allows them to exceed this amount. Check with your employer to see how much you can spend.
- The employer receives the full cost of the bike back and as a business you can also receive back up to 13.8% in NICS savings. It therefore benefits both you and your employer.
For more information on cycle to work and a helpful calculator that shows you how much you could save click here.
How does it work?
Cycle to work is a salary sacrifice scheme. Simply put, you sacrifice part of your salary and your employer gives you non-cash benefits such as childcare vouchers or increased pension contributions. In this case you are giving up part of your salary to loan a bike from them.
A hire fee is deducted by your employer from your monthly wage. Because this is deducted from your gross wage rather than nett you pay less tax and National Insurance. You in effect only pay tax and National Insurance on the wage AFTER the monthly deduction for the Cycle to Work scheme.
Are you responsible for the Cycle to work scheme at your workplace?
It is not only the employee who benefits from the cycle to work scheme, due to the reduced National Insurance payments as a business you can save up to 13.8% through reduced NI contributions. Contact us to find out how we can improve participation and engagement for ‘Cycle to Work’.
If you search the web you will see that there are many scheme providers. Three of the most popular are listed below and work slightly differently;
Unlike all the other schemes with GCI you are not limited to the government set limit of £1000. This means you have a far greater choice of bikes available to you. You hire the bike from your employer for a 12 month period and at the end of this period you are loaned the bike free of charge for a futher 5 years. Once this expires you can purchase the bike for £1 from GCI.
Halfords like most schemes have the £1000 limit,
- You apply for a letter of collection which is then provided to the retailer as payment/part payment.
- The bike is loaned to you from your employer for a period of 12 months.
- Once this hire period expires you then have the option to keep the bike and it is up to your employer whether they levy any charge for doing so.
Again the limit is set at £1000 so any amount over this would be out of your own pocket.
- Apply for the e-certificate which can be used online to pay for the bike.
- The bike is loaned to you for a period of 12 months.
- At the end of the 12 months you have the option to loan the bike for a longer period or return it at no cost to yourself.
If you need any further clarification or advice please contact our helpful customer service team by phone on 01772 963400 or email [email protected] We also have a webpage outlining the process which you can view here.
The order process
- First and foremost you should check that your employer is signed up to one of the many scheme providers.
- Next, search for the bike that you would like and any accessories that you may require up to the value of £1000. If the price is over £1000 check with your employer to see if they are happy to let you overspend. The majority of employers are quite relaxed about any overspend. Any extra amount over the £1000 is paid directly to the retailer when a voucher or certificate is handed over.
- The employer then completes a hire agreement with the scheme provider.
- In due course a voucher or e-certificate is provided and this is then provided as payment to the cycle retailer. If you are unsure of exactly what form of payment each provider uses please contact them directly or ask the retailer.
- The cost of the bike is then deducted from your salary on a monthly basis. (It is therefore necessary to be a National Insurance and PAYE contributor. )
- At the end of the 12 month hire agreement your employer can choose to let the you keep the bike with no extra payment due or charge a nominal fee.
Looking to buy a new bike on cycle to work? View the 2019 range here