Understanding the Cycle to Work Scheme: Benefits and How It Works

The Cycle to Work Scheme is a government-backed initiative in the UK designed to encourage employees to adopt cycling as a sustainable mode of transport. It offers significant savings on the purchase of bicycles and cycling equipment by allowing employees to pay for them through salary sacrifice, effectively reducing their taxable income.

How Does the Cycle to Work Scheme Work?

The process begins with an employer signing up with a Cycle to Work provider. Employees can then select a bike and/or equipment up to a certain value, usually capped at £1,000, though this limit can be higher if the employer’s scheme is registered under the Financial Conduct Authority (FCA). The cost is deducted from the employee’s gross salary over a 12 to 18-month period, reducing their overall tax and National Insurance contributions.

Key Benefits:

Cost Savings: Employees can save up to 32% on the cost of a new bike and accessories, depending on their tax bracket.
Health and Wellbeing: Regular cycling improves cardiovascular health, reduces stress, and promotes a healthier lifestyle.
Environmental Impact: Encouraging cycling reduces carbon emissions and traffic congestion, contributing to a greener environment.
Employer Advantages: Employers benefit from healthier, more punctual staff, and may also reduce their National Insurance contributions.

Eligibility and Limitations:

The scheme is open to all employees, including those on minimum wage, provided the salary sacrifice does not reduce their earnings below the minimum wage threshold. It’s important to note that the bike should primarily be used for commuting to and from work.

End of the Hire Period:

At the end of the hire period, employees typically have the option to purchase the bike at a fair market value, extend the hire agreement, or return the bike.

Conclusion:

The Cycle to Work Scheme is a win-win for both employers and employees, promoting healthier lifestyles, cost savings, and environmental responsibility. It is a simple and effective way to make cycling more accessible and attractive to the workforce.