There is no better time to start cycling to work than the spring. You have five or six months ahead of you when you can rely on the weather being agreeable more often than not and it’ll still be light out for your ride home.
If you need to get your hands on a bike to take advantage of these bike-friendly conditions, it’s worth seeing if your employer takes part in the Cycle to Work scheme so you can ultimately pay less for that bike.
What is the Cycle to Work scheme?
The scheme helps you to get your hands on a new bike by spreading the payment for it over a number of months – and by netting you a massive saving, because up to £1,000 of the cost of the bike and accessories comes out of your pay before tax.
Your employer will be paying for the bike, so you’ll need to check to see if it’s signed up for the scheme. And if not, ask your boss why not, because the employer also benefits by making a saving on its employer national insurance contribution (of 13.8% of the value of the bike), as well as having a fitter, happier employee.
How does it work?
If your employer is signed up to the scheme you can pick out the bike and accessories you want from one of more than 2,000 participating retailers. Then head back to your HR department to get a certificate for the value of what you want, which you can then use to get your bike from the retailer. From then on the monthly repayment will start popping up on your payslip, coming out of your gross salary so you don’t pay tax on it.
Generally you sign up for 12 months where you’re technically hiring the bike from your employer, though some employers do allow you to pay the money back over a longer period.
Once you’ve finished this period, you have to pay an additional ownership fee to keep the bike, buying it at what HMRC terms a fair market value. This may seem a bit counterintuitive since you’ve just paid back the entire cost of the bike, but you’ve saved money on the tax so overall you’ve saved cash.
There are two ownership options to choose from, with “Own it later” being the cheapest. To own it later you pay a 3% deposit on bikes that cost less than £500 new and 7% on bikes that cost over £500. In three years you can either return the bike and get your deposit back, or just hold on to the bike. The “Own it now” option fee is 18% or 25% of the value.
How much do you save?
As much as £390 if you spend the whole £1,000. Here comes the science bit, try to stay awake at the back. Since the savings are made on the basis that you don’t pay tax on the money you spend on the bike, they are linked to how much tax you pay. For a low-rate taxpayer you will save 32% of the value of the bike and accessories you buy, while a higher-rate tax payer will save 42%. That’s during the initial hire period, and you’ll then have to pay the ownership fee at the end. If you opt for the “Own it later” approach there your overall saving will end up at between 25% and 39% of the value of the bike, depending on your tax rate.
What can you get?
Pretty much anything you want, up to the value of £1,000. You can even get more than one bike, as long as the primary purpose of both is commuting. Some employers also allow you to top up the amount you get from the Cycle to Work scheme with your own money, so you can make a saving on a bike that costs more than £1,000. You can also get an e-bike, though most of those cost over £1,000.
If you’re kitting yourself out from scratch it’s worth putting some of the money available towards essential accessories too. It’s vital to have at least one but preferably two good-quality bike locks, and you’ll also probably want a helmet, bike lights and one or two bits of cycling gear like a jacket and jersey.
Can you get a bike that’s on sale?
Absolutely, although not from every retailer. Fortunately there are plenty of no-quibble retailers that allow you to hit the sales, including big hitters like Evans Cycles, Wiggle, Cycle Surgery and Chain Reaction Cycles.
Are there other similar schemes?
There are indeed. Most major cycling retailers will be part of several schemes alongside Cycle to Work, and Halfords, Wiggle, Chain Reaction Cycles and Evans Cycles all operate their own similar schemes.