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Cycle to Work Scheme - 5 Things to Know

The Cycle to Work scheme was introduced in 1999 with the intention to encourage people to make more environmentally friendly and healthier choices. It allows employees to buy a bike and pay it in monthly installments over the year contract. Essentially, after this year, your employer can technically take the bike back, but you have the option to purchase it for market value. The scheme allows employees to spend tax-free money on bicycles and relevant safety equipment, resulting in a saving of 42% on the overall cost.

It was originally believed that the maximum spend was £1000, but with the newest guidelines, this is not the case, and also it confirms that e-bikes are no longer exempt. The scheme allows you to use the bike equipment for use outside work commuting too, but the guidelines so state that at least 50% of the bikes use must be for active travel purposes.

So, what else do you need to know about the Cycle to Work scheme? This blog will explain all…

1. Who can get a bike on the cycle to work scheme?

To get a bike on the Cycle to Work scheme, your employer must enroll and sign up to a provider, like Cyclescheme allowing you to buy from us at PowerRide. If you are self-employed, you can make use of the scheme if you’re set up as a limited company, or if you purchase the bike and claim VAT back via the business.

2. Cycle to Work salary sacrifice calculator

One example to explain how to calculate the costs is if you pay tax at a standard rate, and you take out equipment valuing at £1000, your monthly payment will be £83.33, and your savings will depend on your tax bracket.

If your monthly salary was £2000, you would normally pay £640 in Income Tax at 20%, and National Insurance at 12%. But with the £83.33 salary taken into account, your monthly tax and National Insurance is only £613.34, meaning each month you save £26.66.

Throughout the year, you’ll save on average £320; the combination of Income Tax and National Insurance, at 32% of £1000), and only pay £680 of your £1000 cycling equipment. These calculations work across the board. If your total outlay is £800, you’ll save 32%, so only pay £544 over the year.

3. What is the enrollment process?

Cycle to Work scheme enrollments may vary, but this is what the average enrollment process looks like:

  • As an employer, enroll in a Cycle to Work scheme

  • As an employee, find out what scheme your employer is enrolled in, therefore where you can buy your bicycle from

  • Speak to your human resources department and request a certificate

  • Once you have received the certificate, take it to the relevant bike shop and redeem it against the cost of the bicycle and equipment

  • The payments then start from your next pay packet

4. What if I leave my job during the hire period?

People move jobs and careers all the time and for different reasons, but what happens with your bike from the scheme?

Your employer is within their rights to take the bike back and use it as a ‘pool bike’ for other employees, but this is one of the more unlikely situations. In most cases, the said employee and employer will want the employee to keep the bike, in which the employer will deduct the remaining balance from the final salary. Deciding to charge fair market value on top is up to them. If you are concerned about money, you can just say to your employer that you don’t want to keep it, and then you would just give it back and you won’t have to pay.

It is also understandable to ask if your person or any other benefits could be affected by opting in the scheme, as pensionable earnings are calculated on your gross pay before deductions that you may have.

5. Save money with Cyclescheme

Get a PowerRide bike with Cyclescheme. Cyclescheme is an employee benefit scheme that saves you up to 39% off a bike and safety equipment. You pay nothing upfront and then the payments are taken out of your salary by your employer. You can request a Cycle to Work package of more than £1000 if you wanted, meaning you now have the freedom to save on our e-bikes too.

If you require any further information on the Cycle to Work scheme, head to our website here, and if you want to read our other blogs, click here.


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