Cycle to work scheme

[hpsaucey]

HI there. Has anyone used the cycle to work scheme to get a new bicycle? I don't think I understand how it works and was hoping someone else did.

It says that you pay a salary sacrifice for the bike for a 12-month rental period but the employer owns the bike and you have to buy it from them 'at market value' after the 12 months.

I'm sure I'm being stupid and misinterpreting but doesn't this mean you end up paying extra in effect?

Help!!!

Helen

[Fuschia]

The FMV at the end of rhe hire period would typically be something like 5% of the original price, pus VAT

http://www.cyclescheme.co.uk/employee,faqs.htm

http://www.whycycle.co.uk/buying_your_bike/cycle_to_work_schemes/

[Applespider]

Yes, I did it last year - you end up saving a fair amount - even more if you're a 40% tax payer. And yes, they tend to have a nominal value at the end of day rather than a market one.

The other good thing about it is that you can get any cycling accessories that you need at the same time. So you also save money on a bike lock, lights, rack/panniers, jacket.

Depending on which scheme your employer has signed up to, you can end up saving the cost of the VAT on the bike and accessories plus not paying the tax on that portion of your salary so it ends up quite a bit cheaper.

[felt-tip]

You buy a voucher for up to ?1000 which you redeem to buy a bike from somewhere that your employer has the scheme with.

You then pay back the voucher to your employer over 12 monthly instalments by way of at source salary sacrifice - so because its coming out of your gross salary you are essentially getting a discount at your rate of income tax. I think its VAT free too but Im not sure.

So if you want to buy a ?1000 bike it would normally cost you about ?90 a month but you should deduct your tax rate from that so depending on what you earn it could be as little as ?50 a month. At the end of the year you pay a small nominal amount and then the bike is officially yours. Before that its officially the employers (but you use it) so that if you stop paying your monthly amount because you leave the firm they can take it off you or charge you the full amount of the bike. Like a hire-purchase agreement on a car.

If you plan on staying with your employer for a year then definitely do it.

[Sandperson]

I've done it twice. I paid ?1.50 for my bike at the end of the scheme.

[Tolly]

You chose a bike and accessories. You request the bike or a voucher fir the cLue from your employer. Your employer pays the bike company for the bicycle you have chosen (capped at ?1000). If your employer is vat registered, they then deduct 17.5% (because they can reclaim the vat seperately) and then the outstanding balance is deducted in 12 equal instalments. As mentioned above, it's deducted before you pay tax and ni so you save either 22 or 40% tax plus 1% ni.

The bike remains the property of the employer at all times. This is important because hire purchase schemes aren't eligible for salary sacrifice but hire schemes are. Generally what happens is that your employer chooses to dispose of the bike and you take it off their hands for a nominal fee. But that can't be agreed in advance and committed to writing.

So in practice;

value of bike = 1000

cost you pay = 825 (the remaining 175 is the vat reclaimed by company)

monthly sum before tax and ni = 68.75

how much that monthy sum would cost you in salary if you were paying it out of your pocket after you'd been paid; 116.53 (40% tax plus ni) or 89.29

monthly saving to you = 47.78 (if higher rate tax payer) or 20.54 (if lower)

hope this helps. The evans website has quite a good savings calculator.

A.

[hpsaucey]

Wow - thank you everyone for your useful responses. I understand it now!!! Am pursuing my employer now to persuade them its a good idea to sign up!!!

Cheers,

Helen

[jenny1840]

Wow tolly , very sexy.