As an employer, you’ll likely be familiar with the existence of the government’s Cycle to Work scheme and perhaps even some of the benefits of it for you, the employer. With more than 500,000 people already signed up through the scheme, its popularity is clear and continues to rise, and being able to communicate the benefits of the scheme to your employees could help them and you, too.
As the scheme is a salary sacrifice arrangement, and is deducted before tax, it will reduce the employee’s income tax and National Insurance Contributions. This means that, although the Cycle to Work scheme is effectively a hire purchase agreement on a bike, the employee is effectively getting a huge discount on the cost of the bike over the twelve-month period when compared to buying it in any other way. These savings can equate to 32% for basic rate taxpayers right up to 42% for high rate taxpayers. For employers, 13.8% of the total value of salary sacrifice is saved, because the Employers’NICs are also reduced due to the effectively reduced gross salary.
At the end of the hire agreement period (typically twelve months), the bike becomes the property of the employee, having purchased it at a reduced rate thanks to the way in which the scheme is designed. Alternatively, the employee can return the bike and have their deposit refunded in full. If your employee already owns a bike, they can obtain safety equipment and accessories through the scheme instead, helping them to cycle to work more safely and effectively. This can include helmets, bells, lights, panniers, locks and chains, pumps, repair kits and reflective clothing amongst a range of other items of equipment.
All in all, the benefits can be distilled down into the clear financial benefits in terms of savings on tax and being able to buy a bike at a greatly reduced cost, the health benefits which come with cycling to work and keeping fit on your commute and the environmental impact of leaving the car at home and instead heading to work on two wheels. As the scheme continues to grow and more and more people get involved, the popularity growth becomes exponential, with the aim to reduce Britain’s carbon footprint (it already saves enough CO2 equivalent to that produced 24,000 homes a year), improve the health of its citizens and also help to save them some cash whilst they’re doing so.