By Vicki Owen
PUBLISHED:21:28 GMT, 15 September 2012
Britain's cycling success in the Olympics and Bradley Wiggins’ historic Tour de France win have sparked a cycling boom, prompting many workers to buy bikes through the Government’s tax-rebated cycle-to-work scheme.
And with many retailers discounting this year’s models as 2013 versions are brought into shops this month and next for Christmas, now is a good time to invest in a bike.
The scheme, launched in 1999 to promote healthier journeys to work, is a tax exemption that lets firms lend bicycles and cycle safety equipment to staff as a tax-free benefit. Employees can save up to 42 per cent in income tax and National Insurance contributions on a new bike and accessories for cycling to work.
Money spinner: Julie Bake saves on bike and petrol costs
Arrangements differ according to which provider of the Government’s scheme a company uses. The main ones are Cycle Solutions, Evans Ride2Work, Halfords cycle2work and Cyclescheme.
In most cases employees obtain their bike through a tax-free loan from their employer as part of a salary sacrifice arrangement. The cost of the bike, usually up to the value of £1,000, is deducted from the employee’s salary, usually over a period of 12 months.
Though employees do not actually own the equipment, they are free to use it as they wish, provided it is mainly for cycling to work, and many employers offer their staff the chance to own the bike at the end of the agreement.
Demand under the cycle-to-work scheme is strong. The Halfords cycle2work programme reported a nine per cent rise in shoppers using it to buy bikes in the six months to September.
Charles Ashwell, corporate sales manager at Halfords, says: ‘We have seen a spike in demand, particularly at the lower end for bikes costing £250. We have also noticed a rise in female employees looking to use the scheme.’
Cyclescheme, which is offered through a network of 1,800 independent bicycle retailers, saw record demand in the week after Wiggins’ historic victory in the Tour de France.
Julie Bake has just picked up a Boardman fi Road Team Carbon bike, which would usually have cost her £999.99. She will pay about £680 under the cycle-to-work scheme. It will be her second bike as, being a keen time trial cyclist, her first bike was too specialist for the 15-mile daily round-trip into work.
Julie, 55, works with adults who have learning disabilities at Tees Valley and North Yorkshire NHS Foundation Trust.
She says: ‘There are health benefits, but I am also saving on petrol. I used to spend about £30 a week on fuel but I have halved that. I have probably saved about £320 on the cost of the bike from using the scheme six weeks ago. I would never have been able to afford a second bike otherwise.’
Julie’s husband, Andrew, 50, is also a keen cyclist and is trying to encourage his employer, Durham & Tees Valley Probation Trust, where he works as a probation officer, to enrol in a cycle to work scheme.
Julie has £56.67 a month taken from her salary for the use of the bike, which she uses for her journey from Great Ayton, North Yorkshire, to Middlesbrough. After the 12 months are up she says that she will want to hold on to the bicycle. ‘The Trust is happy for me to keep it,’ she says.
‘There is a slight pay-back on tax. It will probably be an arrangement of a couple of pounds a month over a year.’
Ashwell says: ‘At the end of the 12 months the employer will want to get the bike off its balance sheet. The most popular way, used by about 80 per cent of firms, is to use the Revenue’s valuation guidelines and declare it as a reportable earning. Then the employee will pay tax on that.’
According to the Revenue’s calculations, a bicycle costing £500 or less retains just 18 per cent of its value after one year while one that cost more than £500 keeps just 25 per cent of its value after a year.
Ashwell says: ‘Therefore after a year a £1,000 bike is worth £250 and the firm could declare £250 on a P11D expenses and benefits form. The employee will pay tax of about £50 on the bicycle. Employers like it because it is using established principles of benefit reporting.’
Halfords and Evans feature National Insurance contributions and income tax savings calculators for their cycle-to-work schemes on their websites.
For income tax allowances and relief if you are self-employed, go to hmrc.gov.uk/incometax/relief-self-emp.htm.
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