Explain the cycle to work scheam in a nutshell
Discussion
You apply for a voucher for the cost of a bike plus accessories (as required)
The cost of the voucher is divided by 12 and taken monthly from your salary BEFORE deductions.
So for a £1000 voucher you have a deduction of £83.33, with the savings on tax and NI the amount going off your bottom line is £56.67 meaning a £1000 bike costs you £680.
Then there is the cost to you at the end of the scheme, for which I don't have the exact figure to hand, but it can be placed onto you as a BIK so you still end up only paying a small amount. IIRC after 3 years a £1000 voucher only costs £2 per month for a year.
The cost of the voucher is divided by 12 and taken monthly from your salary BEFORE deductions.
So for a £1000 voucher you have a deduction of £83.33, with the savings on tax and NI the amount going off your bottom line is £56.67 meaning a £1000 bike costs you £680.
Then there is the cost to you at the end of the scheme, for which I don't have the exact figure to hand, but it can be placed onto you as a BIK so you still end up only paying a small amount. IIRC after 3 years a £1000 voucher only costs £2 per month for a year.
Yes for those on lower income the tax break is less, but still it's a tax free bike (plus as much kit as you can eat) so you get at least your basic amount of tax back. Plus paid over 12 months so it's effectively an interest free loan.
The schemes I saw are all over a year, not 3. As far as I know you can get a new bike each year.
As the above post says you do need to in theory pay a residual balance for the bike at the end of the period though some (most?) employers waive the payment so it's treated as a benefit in kind and you're taxed accordingly ie you pay tax as if you'd been given the balancing payment by your employer as part of your income.
The schemes I saw are all over a year, not 3. As far as I know you can get a new bike each year.
As the above post says you do need to in theory pay a residual balance for the bike at the end of the period though some (most?) employers waive the payment so it's treated as a benefit in kind and you're taxed accordingly ie you pay tax as if you'd been given the balancing payment by your employer as part of your income.
I'm looking into this at the moment, via http://www.bike2workscheme.co.uk/faqs.php
In a nutshell, the employer buys the bike (via a voucher) and owns it for the first year while you pay your monthly payments before tax. At the end of the year you can pay a %age of the depreciated value of the "asset" and own the bike outright. Alternatively the company can own it for the next 3 years, after which it becomes yours.
More info in the link above, but that's the gist of it.
The benefit is really that you buy it out of your salary before tax and NI, so the savings are either 20ish(?) or 42%. The other benefit, as already mentioned, is that you pay for it over 12 months, so it acts like 0% finance.
You are also able to buy a new bike every 12 months if you wish.
In a nutshell, the employer buys the bike (via a voucher) and owns it for the first year while you pay your monthly payments before tax. At the end of the year you can pay a %age of the depreciated value of the "asset" and own the bike outright. Alternatively the company can own it for the next 3 years, after which it becomes yours.
More info in the link above, but that's the gist of it.
The benefit is really that you buy it out of your salary before tax and NI, so the savings are either 20ish(?) or 42%. The other benefit, as already mentioned, is that you pay for it over 12 months, so it acts like 0% finance.
You are also able to buy a new bike every 12 months if you wish.
Jimboka said:
i told you so!. Various schemes do things differently. Look at your friends scheme Faqs for proper info as the last reply differs greatly from my scheme..
Isn't it a government scheme and, therefore, the same regardless of who administers it?As mentioned, you might find different employers treat the final balance to pay differently, but underneath I think the scheme will be the same.
Interested to know how your scheme differs to the previous poster?
Better to view it as a salary sacrifice than a deduction.
Some schemes save the VAT too, but other schemes keep that as an admin payment.
It's important to keep the bike on the scheme for a long stretch, i.e. 3+ years as the value left in the bike is too high if you buy after just 12 months. The Revenue have tightened up on this.
Some schemes save the VAT too, but other schemes keep that as an admin payment.
It's important to keep the bike on the scheme for a long stretch, i.e. 3+ years as the value left in the bike is too high if you buy after just 12 months. The Revenue have tightened up on this.
RRS_Staffs said:
The final payment is the deal maker or breaker
I bought a *cough* commuting bike *cough* a while ago and it was a no brainer
However, now the final payment has been increased by my employer to make it a lot less attractive
Check the small print
Again, I thought this was a government scheme with set prices/rates? How did they increase the final payment?I bought a *cough* commuting bike *cough* a while ago and it was a no brainer
However, now the final payment has been increased by my employer to make it a lot less attractive
Check the small print
wiggy001 said:
Again, I thought this was a government scheme with set prices/rates? How did they increase the final payment?
At the risk of repeating myself, it was the Revenue that caused the change. Schemes would charge a token value at the end of the agreement and the Revenue found these were unrealistic and set out their own, higher, suggested values. Some people a my work paid just £50 or less and got charged £250 for the same thing under the new regime. That's the Revenue, not my Employer and not the scheme.
Magic919 said:
wiggy001 said:
Again, I thought this was a government scheme with set prices/rates? How did they increase the final payment?
At the risk of repeating myself, it was the Revenue that caused the change. Schemes would charge a token value at the end of the agreement and the Revenue found these were unrealistic and set out their own, higher, suggested values. Some people a my work paid just £50 or less and got charged £250 for the same thing under the new regime. That's the Revenue, not my Employer and not the scheme.
I thought (although my link doesn't confirm this) that the "asset" depreciates by a fixed %age, leaving a known "balance" at the end of a year, and therefore no room for the employer to adjust this balance, as suggested by the poster I quoted?
wiggy001 said:
At the risk of repeating myself, I was quoting someone that stated that their employer changed the final payment amount.
I thought (although my link doesn't confirm this) that the "asset" depreciates by a fixed %age, leaving a known "balance" at the end of a year, and therefore no room for the employer to adjust this balance, as suggested by the poster I quoted?
One assumes they were referring to the point where HMRC closed the loophole where £1k bikes were being transferred to staff at 12 months for £1. I thought (although my link doesn't confirm this) that the "asset" depreciates by a fixed %age, leaving a known "balance" at the end of a year, and therefore no room for the employer to adjust this balance, as suggested by the poster I quoted?
Now there is a defined "expected future value" table. Bikes < £500 are considered to be worth nothing at 5 years; >£500 <£1k after 6 years.
The depreciation scale is set by HMRC, and varies depending on the value of the bike.
Maximum value is £1000, unless your employer has a lending license, in which cadse if they wish they can offer up to £3k (unfortunately although my employer is a bank they don't offer this).
My employer have set the scheme up to be over 36 months, no other option. As I understand it, there are only two sensible options, 12 or 36 months.
If I leave my employer prior to the end of the three years, they will take all outstanding payments, plus the calculated depreciation value of the bike from final salary payment. I would imagine most employers have similar terms to prevent them being lumbered with bikes they don't want.
My employer sees it as an incentive to cycle through tax breaks. They are happy to organise things to reduce the overall and monthly costs as much as possible, but leave no liabilityh for themselves. Which seems fair enough.
I'm waiting for my first payslip with the sacrifice, but the number I have in my head (and told the missus), was that the bike was costing me £20 per month difference to my takehome pay.
Which in the grand scheme of things is bugger all, and well chuffed with my Boardman Pro HT. If I quit smoking (which I'm definitely getting towards, even the one weekend I've had the bike cut my intake by 2/3), that's a net difference of £180 per month to go towards shiny anodized bits/upgrades/other boys toys.
Plus I'm doing my bit in terms of tax avoidance.
Maximum value is £1000, unless your employer has a lending license, in which cadse if they wish they can offer up to £3k (unfortunately although my employer is a bank they don't offer this).
My employer have set the scheme up to be over 36 months, no other option. As I understand it, there are only two sensible options, 12 or 36 months.
If I leave my employer prior to the end of the three years, they will take all outstanding payments, plus the calculated depreciation value of the bike from final salary payment. I would imagine most employers have similar terms to prevent them being lumbered with bikes they don't want.
My employer sees it as an incentive to cycle through tax breaks. They are happy to organise things to reduce the overall and monthly costs as much as possible, but leave no liabilityh for themselves. Which seems fair enough.
I'm waiting for my first payslip with the sacrifice, but the number I have in my head (and told the missus), was that the bike was costing me £20 per month difference to my takehome pay.
Which in the grand scheme of things is bugger all, and well chuffed with my Boardman Pro HT. If I quit smoking (which I'm definitely getting towards, even the one weekend I've had the bike cut my intake by 2/3), that's a net difference of £180 per month to go towards shiny anodized bits/upgrades/other boys toys.
Plus I'm doing my bit in terms of tax avoidance.
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