Cycle to Work Scheme – Emma Reid – April 2021
As Covid restrictions lift and the weather improves, now is a perfect time to consider introducing a government supported Cycle to Work Scheme. This scheme allows both the employer and the employee to save money. The loan scheme allows the cost of the bike to be spread over 12 months for the employee and the payment is deducted straight from the employee’s pay through salary sacrifice before tax.
Why should you introduce a cycle to work scheme?
Throughout lockdown many employees have spent a lot more time working from home and have become more inactive. Cycling to work, once offices open again, can have a positive impact on individuals’ mental and physical health.
Furthermore, as Covid restrictions lift, employees may be looking for replacements to crowded public transport and cycling may be an option that suits their lifestyle.
We are also becoming more environmentally conscious as a society and cycling can provide employees a low carbon alternative to travelling to work.
Two Possible Cycle to Work Schemes
There are two possible schemes: a loan scheme or pooled scheme.
The employer will provide an interest free loan to the employee to purchase a cycle and/or safety equipment with a voucher. This loan is repaid through salary sacrifice over the next 12 months.
The employer purchases a fleet of cycles for active travel which are made available to employees, either on a one-to-one basis or a pool basis.
This article focuses on the loan scheme as this scheme is suitable for all employers while the pooled scheme is more suitable for employers with a larger number of staff.
What are the benefits of the scheme?
This scheme allows both the employer and the employee to save money. The loan scheme allows the cost of the bike to be spread over 12 months for the employee and the payment is deducted straight from the employee’s pay through salary sacrifice before tax. This means that the employee’s income tax and national insurance will be reduced and similarly the amount of employer’s national insurance will also be reduced.
The table below gives examples of how much can be saved (based on 21/22 tax rates).
|Voucher Amount||Employee Saving (Basic Rate Taxpayer)||Employer Saving|
Who can apply?
An employer of any size can introduce a Cycle to Work Scheme as long as the scheme is offered to all employees. The tax and national insurance benefits, however, only apply to staff who are treated as employees for tax purposes.
If you are self-employed you cannot be included in this scheme.
How to set up the scheme:
A voucher of up to £1000 (and sometimes more with some third party scheme providers) can be provided to employees who take part in the scheme and the employer can either set up their own salary sacrifice scheme, or they can work with third parties scheme providers who can ensure that the scheme is set up correctly. Different third-party schemes may have restrictions as to which bike shop will take their vouchers, so the availability of local bike shops should be a consideration when choosing a third-party scheme.
Once a scheme has been chosen the employer should publicise the cycle to work scheme with employees.
Each employee will need to do some research into the cycle and equipment that is right for them and then request a voucher for that amount.
Once the employee receives the voucher they will then be able to go to the shop and purchase their cycle.
The amount of the voucher will then be deducted from the employee’s pay in monthly instalments.
If you need advice setting up a cycle to work scheme or any other payroll advice, please get in touch with the team at Freedman, Frankl & Taylor Chartered Accountants.
For further information – https://www.gov.uk/government/publications/cycle-to-work-scheme-implementation-guidance