You may have heard about the Cycle To Work scheme, but don’t really know what it’s all about. Well, look no further...
Cycle To Work is a government-approved scheme which allows you to purchase a bike pre-tax. Therefore, if you wanted to buy a bike worth £800, instead of having to earn £1000 and have £200 tax deducted (assuming a basic rate tax payer), you only have to earn £800, thus saving you 20%.
How Does It Work?
Your employer has to be signed up to the scheme first. There are many private companies which are, and almost all government sectors are too, including the NHS. If your employer is not signed up, go and ask them to. It’s quick, easy and also provides some national insurance benefits to them too!
The key aspect to understand is this: you will not own the bike. The bike will be bought by your employer, who will ‘hire’ you the bike for 12 months. Over the 12 month period you will repay the cost of the bike as a salary sacrifice, paid before tax, in monthly instalments.
What happens after 12 months? Well, you can buy your bike from your employer for ‘fair market value’ (FMV). This used to be 5% of the purchase price, but in 2005 the rules changed. For bikes over £500 the FMV is now 25%. SAY WHAT!? However, do not worry!
Obviously paying 25% of the purchase price to buy the bike will mitigate all the savings made previously. But there’s a work-around. After 12 months of salary sacrifice payments the bike ownership gets transferred to a third party (normally whoever your scheme is with) and they continue to rent you your bike, free of charge, for 3 years. As the bike ages, the value decreases.
After these 3 years, your bike is now 4 years old, so you can buy your bike at the FMV of 3% for a package under £500, and 7% for over £500. Simple. The bike is now yours. To see how much you could save, have a look at CycleSceme.co.uk’s Savings Calulator.
Choosing Your Bike
The actual process of getting your bike is a simple one.
- Pop into a participating cycle shop. A list of stores will be available from your cycle scheme provider.
- Choose a bike, helmet and any other accessories you want and receive a written quote. Each scheme has a maximum spend. Most are £1,000 but some go up to £5,000!
- Give the quote details to your employer either directly, or through the cycle scheme website.
- Your employer will pay for the bike through the scheme and inform you when they have done so.
- Print your certificate to say the bike has been paid for, and present this to the shop who did your quote.
- The bike is yours to collect and enjoy.
More Information
Hopefully all this cycling talk has got your cogs turning. Remember, you don’t actually have to cycle to work to get a bike from the scheme! For more information, the Bike Hub have a very extensive article looking at all the details of the scheme.
The leading Cycle To Work scheme provider is Cycle Scheme. Have a look at their website, and if you need to, get your boss to have a look too!
Insurance
As with any expensive item (watch, laptop etc.) it’s possible to insure your new bicycle through your home insurance policy. However, don’t assume that the cover comes as standard. You’ll need to make sure the bicycle is added to the policy and specified in the paperwork. Remember to check that the bike is also insured out of the house, and check any specific requirements such as locks/chains.
It would also be worth getting your bike registered with Bike Register. Registration is free and will add your bike to a national database used by the police to return your bike if it gets stolen. You will pay a small fee (£12.99 + delivery) to have your unique QR code sticker sent to you if you want one. However, if your bike is purchased through Cycle Scheme they will send you a handy 25% discount code.
If you have any questions about insuring your bicycle, don’t hesitate to give our home insurance team a call on 01243 219333.
