Thinking of cycling to work?
Cycling has received a significant boost since the Coronavirus crisis, with more people cycling to avoid public transport and get back to work. Cycle-to-work schemes give tax benefits to both employers and employees.
How the scheme works:
- Employers can register directly with most major retailers that support this scheme, typically by completing an online application, and chooses the scheme parameters, e.g. the spend limit.
- Employees can choose their bike and accessories in-store on online, make an online application to the scheme and agree the terms and conditions of the lease agreement.
- Once the employer approves the application, the employee may collect the bike, components and/or accessories from the retailer.
- The employer receives an invoice from the retailer for payment and implements a salary sacrifice scheme.
What are the tax benefits of a salary sacrifice arrangement:
- The employer recoups the bike cost from the employee via a salary sacrifice arrangement (a monthly deduction from gross salary) of the lease payments.
- Since a portion of the salary is foregone, the employee pays less tax and National Insurance Contributions on the amount sacrificed, i.e. the cost of a new bike and safety accessories.
- Employers also receive a 13.8% saving on Employers’ NIC.
What assistance are available to employers:
You can set up and run your own salary sacrifice scheme, or there are Cycle to Work scheme providers who can run a scheme for you.
Scheme providers usually have access to nationwide retailers with a wider range of brands of bikes, components and accessories, that will cater to employees’ preferences.
What to watch out for:
- It is ultimately the employee’s responsibility to look after the bike, and if the bike is lost, damaged or stolen the salary deductions will still continue until the end of the hire period.
- Specific rules apply if an employee were to leave your company, be made redundant or go on extended sick or maternity leave in their salary sacrifice period.
- The government provides a voucher scheme to employees for financial assistance with bike repairs costs.
If you require assistance and / or advice regarding the scheme or the administration of the salary sacrifice arrangements through your payroll, please don't hesitate to get in touch with a member of our team.