So what is a Cycle to Work Scheme?

Taken from the Department for Transport Website, here's a brief overview:
To promote healthier journeys to work and to reduce environmental pollution, the 1999 Finance Act introduced an annual tax exemption, which allows employers to loan cycles and cyclists' safety equipment to employees as a tax-free benefit. The exemption was one of a series of measures introduced under the Government's Green Transport Plan. The following guidelines clarify how organisations can take advantage of the exemption to implement a Cycle to Work scheme that encourages employees to cycle to work and allows employers to reap the benefits of a healthier workforce.

Cycle to Work schemes are in essence a salary sacrafice scheme, whereby the cost of the bicycle (& accessories) are take out of your wages before tax and National Insurance are applied.  This allows you on average, depending on your tax rate, to save between 32% and 42% on the cost of your bicycle. (See example below)

Employers also benefit from this scheme, saving on National Insurance Contributions.

How can I get a bicycle through Cycle to Work Scheme?

  1. Find out if your employer is signed up to one of the various schemes. Click here for our database of local employers. If not, ask them why not! If you are self-empoyed, yet are paid through PAYE, speak to your accountant. This is the same for any smaller business where an administration company (such as Cyclescheme) is not necessary.
  2. If you're signed up, then come in and talk to us about the bike that you want. We'll advise you on what's the most suitable for your needs and kit you up with any accessories. (Please note there are some exceptions to accessories allowed on a Cycle to Work Scheme.) Most employers are restricted by their consumer credit licence which allows you to spend up to £1000, but this does not apply to every employer.
  3. Once you've chosen your bike we'll write you a quotation and take a £50 refundable deposit to secure your bike.
  4. Depending on the scheme, you then submit your quotation (some schemes allow you to do this online - check with your employer).
  5. Once your quotation has been submitted and approved, you'll get sent a Certificate or Letter of Collection.  Once you have this physically in your hand, please give us a call to arrange your bicycle to be built and kitted out. 
  6. When your bike's ready come in to see us again, bring your Certificate or LoC and some photo ID. We'll get it all signed up, refund your deposit and away you go!
  7. Your payments for the bicycle will then be taken from your wages by your employer. 

Can I see an example of how the scheme could work?

Here’s an example of how the savings work during the hire period, assuming the following:

  • Employee is paid monthly
  • Employee is a standard rate tax payer requesting a £500 Certificate
  • The hire period is 12 months
  • The Employee’s monthly gross salary is £1,200.00 (£14.400 per annum)
  Salary before 
scheme participation
Salary during
scheme participation
Monthly Gross Salary £1,200.00 £1,200.00
Bike value including VAT
Gross salary sacrifice total
(this amount appears on the hire agreement) 
Monthly Gross Salary after salary sacrifice
Monthly NIC contribution (12%)
Monthly income tax contribution (20%)
Net Salary 
MONTHLY NET SALARY REDUCTION £816.00 minus £787.67= £28.33
MONTHLY SAVING £41.66 minus £28.33 = £13.33

So, because the participants pay less income tax and NIC their NET salary reduction is less than the GROSS salary reduction, and this is how savings are achieved. In this example, the employee makes a £41.66 contribution to the employer, but it only costs them £28.33, resulting in a saving of £13.33 per month. 

Who actually owns the bike?

The bike and equipment remain the property of the employer throughout the hire period, unless the employer uses a finance company to fund the bikes; in this case the finance company or funding bank will own the bikes.

What happens at the end of the hire period?

In order to preserve the tax benefits of the scheme, there can be no guarantee or obligation to transfer ownership to the employee immediately after the hire period has ended.  However, employers generally choose to offer this option in addition to others, either directly or via Cyclescheme.

At the end of the hire period, Cyclescheme will contact employees to discuss the options available.

The most attractive option for employees will be to pay a small, refundable deposit (3% or 7% of the equipment value*) and continue to use the bicycle for an extended period of up to 36 months.

At the end of this period, if the employee does not wish to keep the bicycle, then Cyclescheme will refund the deposit in full.  Alternatively, Cyclescheme may at its discretion, offer ownership of the bicycle to the employee at this point, and no further action or payment will be required if they wish to keep the bicycle.


For more information, please refer to the article 'HMRC Market Value Clarification' on Cycleschemes website, or click here to watch Cyclesheme's video guide to the simple end of hire process.

* the lower figure is for an equipment value of less than £500 and the higher one for equipment value of £500 or more. These figures include VAT.

This is a very brief overview of how the scheme works, if you have any questions, please give us a call on 01209 215787 and we'll be happy to advise you.
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