Cycle 2 work - still worth it?

[Chicken Chaser]

Still worth bothering with? I was about to buy a 2nd hand Genesis Equilibrium until the seller pulled the plug on it. Got me thinking about whether I could get the same bike for a similar price on the C2W scheme

My company is about to start doing it and theyre asking for interest to which they've had loads. I'm waiting on the finer details of it, but say the Equilibrium was £900 (surely a bit pricey for a winter bike you say?!), could it be had for half that price? I'm sure it'd make an excellent winter bike with full guard capability as well the ability to take a rack.

[mrmr96]

Depends how much you earn. It basically works by allowing you to buy the bike with your pre-tax income, not post tax. So unless you're in the 50% tax bracket it won't be half price.

[Rolls]

Beware of any end payment you may have to make.. Means its not worth me doing it any more unfortunately

[Magic919]

mrmr96 said:

Depends how much you earn. It basically works by allowing you to buy the bike with your pre-tax income, not post tax. So unless you're in the 50% tax bracket it won't be half price.

Bear in mind there is a saving in NI too.

[mrmr96]

Rolls said:

Beware of any end payment you may have to make.. Means its not worth me doing it any more unfortunately

How on earth can that be true?

[bertieg]

mrmr96 said:

How on earth can that be true?

the way it works is essentially the employer buys the bike, and you rent it off them, to buy at the end of the term. the rules changed so that the employer can charge a lot more at the end of the scheme than originally

[mrmr96]

bertieg said:

mrmr96 said:

How on earth can that be true?

the way it works is essentially the employer buys the bike, and you rent it off them, to buy at the end of the term. the rules changed so that the employer can charge a lot more at the end of the scheme than originally

Wut? Sounds counter intuitive to me tbh.

[Magic919]

It's that HMRC started to lay down the law a bit. A £1000 bike isn't really worth only £50 after just a year and we all know that. The HMRC suggestion is £250 from what I recall. Best option is to go for a longer rental period, say 3-4 years.

[mrmr96]

Ok, I've done a bit of reading on this now. Here's a link: http://www.cyclescheme.co.uk/employers/employer-fa...

Here's my understanding:

£500 bike, 12m hire period. You have to pay £500/12 i.e. £41.67 per month from your GROSS pay. As a powerfully built company director I'm of course paying 50% income tax. So taking £41.67 off my monthly gross will only hit my bank account with £20.83 less. So over 12mths I'm "out of pocket" by 12 x £20.83 = £250.

However at the end of the 12m period the bike isn't just handed over, as I had previously expected. You can either:
1. Give the bike back.
2. Pay to buy the bike right there and then, or
3. Pay a refundable deposit of 7% (on bikes >£500 or 3% on those <£500) and keep using the bike for 3 more years, with zero monthly payments. At the end of the 3 years they "may" (will) just give you the bike, or you can return it in exchange for your deposit back.

So the total cost to me is 12 X £20.83 + 3% of £500, being £265. A decent saving over the £500 list price.

Another example: a £1k bike (for a 40% tax payer) would have rentals of £600 plus a "deposit" of £70, so £670. Saves you 33% then, and also allows you to pay monthly at 0% interest. I think you'd save a bit more than that due to saving NI as well as income tax.

Seems like a bit of a faff all this business of paying a "deposit" and only "owning" the bike 3 years after the end of the initial scheme period. I suspect the reality of it is that you can use the bike as if you own it for the whole period. One thing I'm not sure about is what you have to do regards maintenance, insurance etc. And what would happen if it broke, or was written off in a crash, or was stolen. (Not looked into that yet.)

[GaryGlitter]

Suprised that no one has mentioned the recommended workaround to reduce the 'final payment' value.

£1000 bike over 12 momths for a basic rate tax payer would leave a settlement fee of 25% of the original purchase price (£250). The 'dodge' is that you pay the tax on the £250 instead of the lump sum, so you only pay £50 (20% of £250). Your employer puts this on your P11D as a 'Benefit in Kind' so depending on your personal cirumstances nothing further will happen.

Another way is for the employer to take the hit.

http://www.bikeradar.com/gear/article/guide-to-the...

http://www.bike2workscheme.co.uk/news.php?item=15

[mrmr96]

GaryGlitter said:

Suprised that no one has mentioned the recommended workaround to reduce the 'final payment' value.

£1000 bike over 12 momths for a basic rate tax payer would leave a settlement fee of 25% of the original purchase price (£250). The 'dodge' is that you pay the tax on the £250 instead of the lump sum, so you only pay £50 (20% of £250). Your employer puts this on your P11D as a 'Benefit in Kind' so depending on your personal cirumstances nothing further will happen.

Another way is for the employer to take the hit.

http://www.bikeradar.com/gear/article/guide-to-the...

http://www.bike2workscheme.co.uk/news.php?item=15

Why is there a 25% settlement fee? Is that "option 2" per my list above? (i.e. you pay to own it at the end of the intial period?) Why would you ever do this when you've got the alternative option of paying 7% 'deposit' to use it for 3 more years (no more payments) and get given it free at the end of that?

[GaryGlitter]

mrmr96 said:

GaryGlitter said:

Suprised that no one has mentioned the recommended workaround to reduce the 'final payment' value.

£1000 bike over 12 momths for a basic rate tax payer would leave a settlement fee of 25% of the original purchase price (£250). The 'dodge' is that you pay the tax on the £250 instead of the lump sum, so you only pay £50 (20% of £250). Your employer puts this on your P11D as a 'Benefit in Kind' so depending on your personal cirumstances nothing further will happen.

Another way is for the employer to take the hit.

http://www.bikeradar.com/gear/article/guide-to-the...

http://www.bike2workscheme.co.uk/news.php?item=15

Why is there a 25% settlement fee? Is that "option 2" per my list above? (i.e. you pay to own it at the end of the intial period?) Why would you ever do this when you've got the alternative option of paying 7% 'deposit' to use it for 3 more years (no more payments) and get given it free at the end of that?

The example I've given in based on paying over a 12 month period, which leaves 25% of the original purchase cost as the disposal value (http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm).

Depending on how clued up your employer is on the scheme (mine isn't), you can make good savings regardless of how long you agree to.


Personally I'd only sign up for a shorter period because the bike becomes mine sooner and it means I'm free to do what with it quicker (i.e. sell it on eBay and get another shiny new bike)

[mrmr96]

GaryGlitter said:

mrmr96 said:

GaryGlitter said:

Suprised that no one has mentioned the recommended workaround to reduce the 'final payment' value.

£1000 bike over 12 momths for a basic rate tax payer would leave a settlement fee of 25% of the original purchase price (£250). The 'dodge' is that you pay the tax on the £250 instead of the lump sum, so you only pay £50 (20% of £250). Your employer puts this on your P11D as a 'Benefit in Kind' so depending on your personal cirumstances nothing further will happen.

Another way is for the employer to take the hit.

http://www.bikeradar.com/gear/article/guide-to-the...

http://www.bike2workscheme.co.uk/news.php?item=15

Why is there a 25% settlement fee? Is that "option 2" per my list above? (i.e. you pay to own it at the end of the intial period?) Why would you ever do this when you've got the alternative option of paying 7% 'deposit' to use it for 3 more years (no more payments) and get given it free at the end of that?

The example I've given in based on paying over a 12 month period, which leaves 25% of the original purchase cost as the disposal value (http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm).

Depending on how clued up your employer is on the scheme (mine isn't), you can make good savings regardless of how long you agree to.


Personally I'd only sign up for a shorter period because the bike becomes mine sooner and it means I'm free to do what with it quicker (i.e. sell it on eBay and get another shiny new bike)

Table is here:

After 12m the residual value is 25%, but by not taking ownership for 3 more years you can drop that down to 3% or 7%.

[Gizmoish]

I'm on the Evans scheme. At 12 months, my employer transfers ownership of the bike to Evans - no fee - and then Evans continues to own it until the 5th/6th year, when the BIK value (as per the table above) is zero.

[Rolls]

mrmr96 said:

How on earth can that be true?

As the end fee is 30% of the value of the bike, which is frankly quite rediculous!
Better off going to Evans or the like, and getting a discount in a bike, and putting it on interest free for a year or 2.. Better choice of bikes ( as I was on the halfords scheme when it did it 3years back when the end fee was £30!), and you're not limited with how much you can spend...

[GaryGlitter]

Rolls said:

As the end fee is 30% of the value of the bike, which is frankly quite rediculous!
Better off going to Evans or the like, and getting a discount in a bike, and putting it on interest free for a year or 2.. Better choice of bikes ( as I was on the halfords scheme when it did it 3years back when the end fee was £30!), and you're not limited with how much you can spend...

You'll never get as much discount on current models so B2W/C2W will save you more so long as your employer runs the scheme with the write off value settled as the taxable amount in the example I gave.

And allegedly it was Rolls (Royce) that screwed up the scheme for everyone in the first place, allowing people to right off the value for pennies after a year.

[Rolls]

swerni said:

Many large companies were the same , it wasn't just them.

We didn't even have a payement at the end of the period.

As to rolls comment, you don't understand the scheme. Why would anyone pay the balance after 12 months?

If you had spoken to Halfords, you would have realised that, they can get you pretty much anything you like.
We were with Halfords at my last firm, they got me a Specialized Tricross, despite not being a reseller for them ( and no, I didn't pay a premium)

Simply as when I spoke to my HR dept, they said I was unable to do anything other than either pay the full 30%, or return the bike. Utter ste, but heyho.. Also know what you mean re bike choice, but they were unable to get anything from the likes of wiggle etc when I did the scheme (I wanted a focus), but ended up with a cross bike from leisure lakes using my halfords voucher.. May have changed now, but I'd rather get a bike on the sales, or try to negotiate a discount in my own right!

[dave_s13]

Nhs employee here. I too never had a final payment to make. Also never cycled to work on it.

[NightRunner]

The final payment on my 1st C2W bike was £36 on a £1k bike - after 2yrs,

[Rolls]

Yeah.. I paid something like 25 quid to keep my cx9, which was worth 950 iirc..
Such ashame they moved the goalposts now! Seems a lot of you are still able to take advantage!