The Cycle to Work scheme is a tax efficient scheme providing work bikes to employees.
Employees make monthly tax-free instalments to the employer to hire the bike. This is done via salary sacrifice, which means the employer deducts the rental payments from an employee’s gross salary which reduces both Income Tax and National Insurance liabilities. E-bikes also qualify for the scheme.
Please note: Most employers use external providers to administer the scheme, and salary sacrifice periods are for a minimum of twelve months.
At the end of the hire period the employee will have three options:
To extend the hire period
To return the bike
Pay ‘fair market value’ for the bike and take ownership of it, the value of which will probably be considerably less than the original cost.
The basic conditions which need to be met are:
In the hire period the employee must not own the bike at any point
At least 50% of the cycle’s use must be for qualifying journeys i.e. commuting to work
The scheme must be available to all employees (but not self-employed workers)
Cycle to work scheme implementation guidance for employers can be found here, or please contact us if you want to learn more about it or implement a scheme within your business.