Cycle to work scheme

August 19th 2014

If last month’s Tour de France has inspired you to get on a bike then make sure you consider the cycle to work scheme.

The cycle to work scheme enables employees and employers to save money by working in the following way:

1. The employer joins a cycle to work scheme and buys a bike (value of up to £1,000 including VAT) of the employee’s choice. If the business if VAT registered the employer can claim the VAT back.

2. The employee hires the bike at the current market value (minus VAT) over 12 or 18 months, through salary sacrifice. This involves deducting payments from the employee’s gross salary which means the employee will  pay less income tax and national insurance.

3. The employer also saves money as the amount of employer’s NICs due is reduced. (For example for a bike worth £500 they would save £69 per employee on the cycle to work scheme).

4. At the end of the 12 or 18 month period the employee has three options;
a. carry on using the bike at no more monthly cost
b. pay the fair market value of the bike plus VAT 
c. give the bike back to the employer.

Please feel free to contact DSC Chartered Accountants in Harrogate if you wish to discuss this article in more detail.