The Cycle to Work Scheme generally known as the Bike to Work Scheme is a tax incentive scheme to encourage employees to cycle to work. Under the scheme an employer can pay for a new bicycle including bicycle accessories and the employee then repays the cost in regular instalments from their gross salary.
Your employer does not have to take part in the scheme. However if they do, they must offer it to all their employees. If you are self-employed you are not entitled to avail of the Bike to Work Scheme unless you pay PRSI as an employee in addition to your self-employed work. As an employee you save on the costs of cycling to work because your repayments come out of your salary before tax, USC and PRSI are deducted. This means that someone on the highest rate of tax will save almost half of the cost of a new bike and equipment.
As an employee you can use the scheme once every 4 years. Salary sacrifice periods are for a minimum of 12 months but can be for longer and your employer can advise on the spending limit. Green Commute Initiative allows for the repayments to be spread over months as agreed with the employer , and they are registered with the FCA for Consumer Hire.
And even more for higher rate ones. This is because technically you have been loaned the bike and you have to buy it at what HMRC call a fair market value. Get active. However, nobody will force you and nobody will be keeping track. The idea is that you, at least, use it to have a healthier lifestyle.
Things that are obviously not going to be a suitable thing for commuting won't be accepted, such as full-face helmets, but there is nothing stopping you from getting a time trial bike or a brand new road bike. Looking back to 11 years ago, in , there were changes made to the so called ;fair market value' that almost left the scheme completely pointless, but it managed to keep going with charity Cycling UK saying it is definitely a good thing to do.
Recent UK stats show that in the years between and , whilst there were fewer trips by bike being made, there was an increase in the distance people are cycling. Covidinduced lockdowns around the world have also seen a huge uptake in cycling numbers. Commenting on the scheme's place in the landscape of the cycling industry today, a representative from Ride to Work told us: "It is the most affordable way to get a bike and, or, cycling equipment, allowing you to get both a reduced cost, and to spread the payments.
This scheme lets you buy a bike and or the necessary equipment tax-free as well as paying it off over the next year in month payments. The Cycle to Work scheme idea is, really, a 'hire period' and after that the company you work for is technically allowed to take the bike back if it wants to do so.
You can, of course purchase the bike but for its 'fair market value' which is generally around 25 per cent of the original value. In the real world there are several cheaper options and hardly any employer will charge the fair market value.
The fact that the payments are tax exempt means that you get great savings of up to 42 per cent. However, the amount you save of course depends on your tax bracket. The higher your earning rate the more you will save. To get a bike on the scheme, your employer needs to sign up to a provider. These include the Cycle Scheme and Ride to Work scheme. Alternatively, you can buy the bike and claim the VAT back via the business.
Your savings vary depending upon your tax bracket. And that works across the board. Although it's questionable if they'll ever want back your smelly shoes or the backpack you spilled the contents of your lunchbox in. Save money on a new bike and related equipment, get fitter, do your bit for the environment and spread the cost over 12 months.
You will be hiring the bike for the first 12 months but then have the option to transfer ownership to yourself for a small fee via Cyclescheme who manage the process. The salary deduction is taken from your gross pay, before Tax and National Insurance deductions; therefore you make a saving by paying less tax and national insurance each month.
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