Introduction

Cycling is a great way to commute to and from work. It is faster and more reliable than driving at peak times in town centres, allows you to get some exercise during your normal day and lets you arrive at work more awake, alert and able to concentrate.

You can travel around 6 miles in half an hour on a bicycle at a moderate speed, meaning that 65% of Somerset’s workers live within 30 minutes cycle commuting distance of their workplace.

There are lots of local and national initiatives to support people cycling to work, ranging from discounted bicycle purchasing schemes to free servicing to national events and Bike 2 Workdays.

Cycle to Work Scheme

The Cycle to Work Scheme enables employees to buy bicycles and equipment for commuting.

The scheme works as a salary-sacrifice scheme. The business buys the bicycle on behalf of the employee, who then repays the cost of the bike via a monthly deduction from their pay packet (usually over 18 months). As the payment comes off before tax and National Insurance contributions are deducted, the employee makes a saving equivalent to the combined value of their tax and National Insurance contributions for that sum. At the end of the loan period, the employee has the option to purchase the bike for the “fair market value” via a final payment.

If the employee wants to keep the cycle and accessories at the end of the 18 months, they could buy it. However, there is no obligation to purchase at the end of the agreement. Employees can simply hand the cycle back to their employer or continue to abide by the rules of the scheme and use the cycle for commuting purposes – in this case, the cycle would remain the property of the employer.

Who is eligible

Employers of all types of businesses can sign up for the scheme to allow their employees to benefit.

Employees must be intending to use their bicycle or equipment primarily for commuting to and from work or between workplaces.

Employees who do not receive a Pay As You Earn salary or who are paid a low wage (when deducting the monthly salary sacrifice would cause their pay to fall below the national minimum wage) may not be able to set up a salary sacrifice arrangement. Cases would need to be looked at individually.

What exactly can you buy

Any bicycle that is to be used for commuting purposes. This can include electric bicycles, tricycles or folding bicycles – anything that is not classed as a motor vehicle.

Technically, there is no limit on the value of the bicycle and equipment that can be purchased under the scheme. Although, in practice most employers impose an upper limit of £1000 (due to consumer credit license rules) and may impose a lower limit in order to make the administration worthwhile.

You can also buy other essential cycling equipment under the scheme, including helmets, locks, panniers, bicycle racks, tools and clothing.

How to set up a Cycle to Work Scheme

Employers who would like to take part in the Cycle to Work Scheme can either:

• Organise a scheme themselves. This is great as it means the scheme can be tailored to the needs of the company or workforce and you do not need to pay an external company, but it does require knowledge of the relevant tax and legal issues.
• Sign up with a third-party operator to provide and administer the scheme. There are a number of Cycle to Work Scheme providers now operating in the UK.

You can find out more about the scheme on the GOV.UK website.

Useful links