The Cycle to Work 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.
This is definitely something worth considering for your business. The tax-free purchase of a bicycle and equipment could be worth several hundreds of pounds, and with public transport costs rising above inflation and congestion charging an issue, why not consider the Cycle to Work scheme for your business.
Employers of all sizes across the public and private sectors are eligible. To qualify for tax exemption, cycles and cyclists’ safety equipment loaned by the employer under the scheme must be available to employees. Employees that already have a bicycle but need equipment are HMRC has recently clarified, eligible to purchase equipment only.
There is no limit to the total value of equipment including the cycle, but the Office of Fair Trading (OFT) has advised that consumer credit licenses will cover schemes up to a value of £1,000.
Employers can pay up to 20 pence per mile tax free to employees who use their own cycles for business travel. Employees cannot claim the 20 pence per mile tax-free mileage allowance for business travel if they use a cycle loaned to them by their employer.
An employer can simply buy a cycle and cyclists’ safety equipment and loan it to an employee for qualifying journeys to work.
A salary sacrifice is neither a deduction from salary nor a charge on salary; it is where the employee agrees to accept a lower amount of salary: the employee can receive the benefit in kind free of tax instead of salary on which tax and Class 1 NICs would be fully payable; the employer will not have to account for Class 1A NICs.
Costs of loaning equipment to the employee are offset through a salary sacrifice arrangement. The employer will save Secondary Class 1 NICs (at up to 12.8%) on the part of the gross salary sacrificed.
If you’d like to know more about the benefits of this scheme, email or phone your account manager today for clarification.
Factsheet for Cycle to Work Scheme
Any questions? Schedule a call with one of our experts.
Sumit Agarwal Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.
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