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Cycle to Work

20 October 2016

Working long hours can impact on your exercise regime, so cycling to work is worth investigation.  The Government will even assist by offering you a tax sweetner, saving up to 42% on the cost of a commuter bike.

The Scheme

The employer initially purchases the bike and then loans it to the staff member under a hire agreement.  Monthly rental payments are deducted directly from the employee's salary under a "salary sacrifice" agreement taken out of gross salary before tax and NI is paid, normally over 12-18 months with no interest payable.


According to Cyclescheme,one of several groups providing the scheme to employers, someone earning £30,000 whose firm acquires a bike worth £600 could save £191.47 and possibly their gym membership fees!  A 41 year old who weighs 12st and cycles at a moderate speed for an hour each day would burn 442 calories, according to the British Heart Foundation - roughly equivalent to a 50 minute jog.

There are also benefits for employers - Lucie Cherrington, head of Halfords' cycle to work division, calculates that a company with 20 workers in the scheme, which bought a £650 bike for each of them would save £1,798 in employers' NI contributions over 12 months.

What Can Be Bought?

The bike needs to be used for at least part of a commute, not just at weekends, and most schemes cap the value of the bike and accessories at £1,000.  This is because many companies choose to join the Office of Fair Trading's special group consumer credit licence (set up just for the scheme), which imposes the £1,000 limit.  Companies that have their own consumer credit licence are not limited in this way, so they could spend a little more!

How Does Payment Work?

The scheme is a hire agreement and not a hire purchase agreement which means staff do not automatically get to keep the bike at the end of the term.  Employers who promise this could lose the tax benefits.

However, companies can sell the bike at the end of the hire period to the employee for market value.  When monthly repayments are finished, most schemes will let you hire the bike for a token deposit.  The longer the hire period lasts, the more this final purchase price will fall.

HMRC states "Typically this would be offered at substantially less than the original value of the equipment", and bikes do depreciate fairly fast.  According to Ms Cherrington, a bike worth more than £500 would have a negligible value after six years.

If you'd like to know more about this great staff incentive that could cut down waistlines and tax costs, get in touch with Ian Haynes at or your usual Springfords contact.

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