Bike to work schemes
Discussion
Looking at buying myself a road bike and obviously a scheme such as this would make a massive difference to the price.
I'm trying to figure out how these schemes work. Does my employer need to be registered for me to use the scheme or do they just need to administer paperwork for me on a one off basis?
Has anyone done this through their work before? My employer doesn't advertise anything around bike to work or similar.
I'm trying to figure out how these schemes work. Does my employer need to be registered for me to use the scheme or do they just need to administer paperwork for me on a one off basis?
Has anyone done this through their work before? My employer doesn't advertise anything around bike to work or similar.
Our work has a large scheme in place. A smaller outfit might offload it to someone like Cyclescheme.
If your employer wants to do it, they need to pay for bike in full and then charge you the money back, normally over 12 months (from your pre-tax earnings.
This is technically a hire and they need to charge you a fair market value for the bike to be yours. Doing this after 12 months is daft as the residuals are too high and they are governed by guideline percentages. Wait 3 years and most of the value is gone.
Above a grand they need a Consumer Credit Licence.
If your employer wants to do it, they need to pay for bike in full and then charge you the money back, normally over 12 months (from your pre-tax earnings.
This is technically a hire and they need to charge you a fair market value for the bike to be yours. Doing this after 12 months is daft as the residuals are too high and they are governed by guideline percentages. Wait 3 years and most of the value is gone.
Above a grand they need a Consumer Credit Licence.
Cyclescheme is owned by The Grass Roots Group, they provide all sorts of out sourced employee benefits schemes for many massive companies.
Get your employer to check out the Cyclescheme website, all of the relevant information and sign up process is on the site.
They are a good bunch of people and very happy to help.
Get your employer to check out the Cyclescheme website, all of the relevant information and sign up process is on the site.
They are a good bunch of people and very happy to help.
what constitutes "fair market value" is going up and up. A few years ago, fair market value of a £1000 would be something like £250 but dont be surprised if thats doubled by now though, different companies and schemes vary so dont count on only having to pay peanuts come the end of the loan period. £500 for a three year old bike with an rrp of £1000 isnt bad though, especially as you are the only owner and have had three years use from it.
Gizmoish said:
If you do it that way you might as well buy the damn thing outright in the first place.
No. You pay the rental over a year and save the tax. Then at the end rather than pay the fair market value, say 25% for example on a £550 bike - £137, you only pay the tax on the fair market value which would be £54 or less if you pay 20% tax rate. That's how it was explained to me. I may have miss-understood but I did clarify it. Doing it the usual way would have meant paying the full £137.944fan said:
Gizmoish said:
If you do it that way you might as well buy the damn thing outright in the first place.
No. You pay the rental over a year and save the tax. Then at the end rather than pay the fair market value, say 25% for example on a £550 bike - £137, you only pay the tax on the fair market value which would be £54 or less if you pay 20% tax rate. That's how it was explained to me. I may have miss-understood but I did clarify it. Doing it the usual way would have meant paying the full £137.Total Salary Sacrifice (gross) = £1000 (paid as 12 x £83.33 from gross wages).
Tax savings: £200 income tax, £120 NI (because £1k "less" salary paid).
Net reduction in salary: £680. (= initial "cost" of bike).
At end of 12 month hire period...
...HMRC dictate that a £1k bike is worth 25% = £250.
Pay the tax on that £250 (20% of £250 = £50) and the bike will have cost £730 in total. 27% discount... Not impossible to get that by buying 'last years model', quite often.
A £550 bike would cost £374 plus £27.50 = 401.50. Only £149 saved.
That fixed HMRC valuation is a lower percentage than I remember. As above though - although I bought my road bike on CTW I probably wouldn't do it again...
I pay 40% tax so my savings were much better. Plus I didn't happen to have £550 lying around when I bought it so being able to pay monthly interest free was also good. The total price I would pay is £370 so a reasonable saving.
The red tape behind the scheme is what annoys me most about it.
The red tape behind the scheme is what annoys me most about it.
My work didn't run one, there are only 9 people here and none are up to riding a bike any distance.
So I had a chat with the HR/finance lady and she said that if I helped her out a bit we could get it sorted together.
We managed to put a contract together and get everything signed off properly and then my bike turned up last week.
The benefit to getting my work to run their own scheme was that I was able to pick a bike from anywhere I like and we also signed me up for 18 months rather than the standard 12. Because I had done all the research into what we needed I understood it enough to get the best deal for me.
This meant that I was also able to get a bike that had been reduced and then get the tax benefit on top of that so in the end I've got a RRP £1000 bike for £20 a month!
So I had a chat with the HR/finance lady and she said that if I helped her out a bit we could get it sorted together.
We managed to put a contract together and get everything signed off properly and then my bike turned up last week.
The benefit to getting my work to run their own scheme was that I was able to pick a bike from anywhere I like and we also signed me up for 18 months rather than the standard 12. Because I had done all the research into what we needed I understood it enough to get the best deal for me.
This meant that I was also able to get a bike that had been reduced and then get the tax benefit on top of that so in the end I've got a RRP £1000 bike for £20 a month!
Gizmoish said:
OK, let's work this through. And let's do the full £1k because that's the maximum possible saving; for someone on 20% tax...
Total Salary Sacrifice (gross) = £1000 (paid as 12 x £83.33 from gross wages).
Tax savings: £200 income tax, £120 NI (because £1k "less" salary paid).
Net reduction in salary: £680. (= initial "cost" of bike).
At end of 12 month hire period...
...HMRC dictate that a £1k bike is worth 25% = £250.
Pay the tax on that £250 (20% of £250 = £50) and the bike will have cost £730 in total. 27% discount... Not impossible to get that by buying 'last years model', quite often.
A £550 bike would cost £374 plus £27.50 = 401.50. Only £149 saved.
That fixed HMRC valuation is a lower percentage than I remember. As above though - although I bought my road bike on CTW I probably wouldn't do it again...
Bad example. This is PH. NO ONE pays 20% tax.Total Salary Sacrifice (gross) = £1000 (paid as 12 x £83.33 from gross wages).
Tax savings: £200 income tax, £120 NI (because £1k "less" salary paid).
Net reduction in salary: £680. (= initial "cost" of bike).
At end of 12 month hire period...
...HMRC dictate that a £1k bike is worth 25% = £250.
Pay the tax on that £250 (20% of £250 = £50) and the bike will have cost £730 in total. 27% discount... Not impossible to get that by buying 'last years model', quite often.
A £550 bike would cost £374 plus £27.50 = 401.50. Only £149 saved.
That fixed HMRC valuation is a lower percentage than I remember. As above though - although I bought my road bike on CTW I probably wouldn't do it again...
pablo said:
what constitutes "fair market value" is going up and up. A few years ago, fair market value of a £1000 would be something like £250 but dont be surprised if thats doubled by now though, different companies and schemes vary so dont count on only having to pay peanuts come the end of the loan period. £500 for a three year old bike with an rrp of £1000 isnt bad though, especially as you are the only owner and have had three years use from it.
Even as a higher rate tax payer, you would've already paid £600 for the bike on salary sacrifice, so how can having to pay £500 more at the end of 3 years (to take your total purchase cost up to £1,100 for a £1,000 bike) constitute good value?
In 2012 I used Cyclescheme to purchase £1000 of Bianchi and extras.
I paid 12 months installments - circa £670
I opted against the final valuation payment and I'll pay no 'rent' for 3 further years and then the bike will officially be 'mine'.
Seems a long time, but I consider the bike mine already and I hear nothing from Cyclesheme.
I paid 12 months installments - circa £670
I opted against the final valuation payment and I'll pay no 'rent' for 3 further years and then the bike will officially be 'mine'.
Seems a long time, but I consider the bike mine already and I hear nothing from Cyclesheme.
pembo said:
This meant that I was also able to get a bike that had been reduced and then get the tax benefit on top of that so in the end I've got a RRP £1000 bike for £20 a month!
Really? I've just spent £762, bike and extras.. my salary reduction is £28 per month on 18 month period also
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