How do Cycle to Work schemes operate?
Cycle to Work schemes are tax incentives that allow employees to contribute to the cost of a bike through a monthly salary sacrifice. At the end of the loan period, which is usually 12 months, the employee can buy the bike for a nominal fee of about 5% of its purchase price. Safety-related equipment such as lights, locks and waterproof clothing can also be included and qualify for the tax savings. Running a Cycle to Work scheme can be cost-neutral. The value added tax (VAT) that would otherwise apply to bicycles and cyclists’ safety equipment can be reclaimed as long as the employee is using the bike as their main form of transport to work. Employers will also avoid the national insurance contribution of up to 12.8% on the value of the salary sacrificed. The savings on the cost of a bike can be substantial. The discount available to an employee depends on their personal circumstances, with those in higher tax brackets benefiting from bigger discounts. Employees are taxed less too, with
