Cycling to work may feel like a path to certain death – particularly if you live in a big city like London.
Buses, black cabs and HGVs are less than ideal road partners, but if you take the right precautions and build up your confidence – riding to work can be incredibly liberating.
Why spend your morning sardine-like in a sweaty tube carriage, when you could be out in the open air, feeling the breeze/pollution on your face and getting a workout in the process?
Bikes don’t come cheap, but the Cycle to Work Scheme could help you make a serious saving. You’ve probably heard of the Cycle to Work Scheme, but if you don’t know how it actually works don’t worry, we figured it out for you.
The Cycle to Work scheme is actually really old. It was launched in 1999 with the aim of encouraging people to make healthier and more environmentally friendly choices.
And now, 20 years on, it feels more important than ever to make positive environmental choices, and your commute could be a great place to start.
The scheme allows employees to spend on bikes and equipment, tax-free, making a saving of up to 42% on the overall value.
It used to be the case that the maximum spend was £1000, but the latest guidelines confirm this isn’t the case. The scheme also includes e-bikes, which is great news if your commute is too far for pedal power alone.
If you get a bike under the Cycle to Work Scheme, that doesn’t mean you’re only allowed to use it for your commute. You can use your bike whenever you like – so start planning two-wheeled jaunts to liven up your weekends.
How does the Cycle to Work Scheme work?
The Cycle to Work scheme lets you pay for a bike and equipment in monthly instalments through your employer over a year-long period.
In theory, after this period, your company is allowed to take the bike back, or you can purchase it for ‘fair market value’ – which can be up to 25% of the original value. But realistically it usually works out much cheaper than this.
The payments are except from tax – which is where you save the 42%. So how much you save depends on the tax bracket you’re in – big earners will save more because they would have been paying more tax.
It’s essentially an interest free loan – which is something we can always get behind.
How do you qualify for the Cycle to Work Scheme?
First of all, your employer needs to sign up to a provider – such as the Cycle Scheme or Evans Cycles’ Ride to Work scheme. You also have to be over 18.
If you’re self-employed, you still use the scheme if you have your own limited company. Or you can buy the bike and claim the VAT back via the business.
How much of your salary will you have to pay?
If you pay an average rate of tax and you buy £1000 worth of equipment, your monthly salary payment will be £83.33. And how much you save will depend on your tax bracket.
That would mean that your total payment towards a £1,000 bike would be £680.
For an £800 bike, you will save 32%, so you’ll only pay £544 over the year.
At the end of the year, you may have to pay your employer a fee in order to properly own the bike outright, but scheme providers have come up with way of reducing the final payment, by allowing you to continue to lease the bike until the payment would be negligible.
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