• Mike Evans

Cycling to work

Save tax by cycling to work

Cycling is becoming more popular as a method of getting to work and for almost 20 years the government have been rewarding cyclists with the cycle to work scheme.  The cycle to work scheme allows employees to sacrifice some of their salary to pay for a bike in order to save the tax on that portion of the salary.  This has worked well as employees tend to save 20-40% on the bike and employers also save 13.8% on the national insurance, but the drawbacks of the scheme have put many people off using it.  Most notably, the maximum amount you can put through a cycle to work scheme is £1,000 so the more serious cyclists looking for a high-end bike were unable to benefit.  More recently, the Green Commute Initiative was set up to enable employees to access the tax savings on bike purchases with no upper limit.

Why cycle to work?

I’m sure we are all aware that cycling to work is healthier for you than driving but that’s rarely enough to persuade someone to actually do it.  There are countless studies that show the positive effects of daily exercise on the body but there are almost as many showing huge mental benefits too.  Daily exercise is widely believed to reduce stress, alleviate symptoms of depression or anxiety and improve sleeping patterns.  Research has even proven that cycling to work could slow down cognitive decline and improve memory and learning abilities.  Still not convinced?  How about the monetary side of things?  Cycling to work on average costs 10-20p per mile if you include depreciation of the bike, breakdown cover and a full annual service whereas using a car will likely cost 30-40p per mile assuming it’s a small/cheap car that will do 40mpg.  That’s a huge saving before you even consider the costs of parking, congestion charges, cleaning etc.

How do these schemes work?

Whether you’re looking to use the cycle to work scheme or the GCI, the mechanics are broadly the same.  The employer would need to set up a scheme with a provider then give a voucher to the employee for the cost of the bike the employee wanted (plus any accessories).  The employee is then effectively renting the bike from the employer until the end of designated period.  Each month during this period the monthly rental will be deducted from the employee’s salary before tax and NI, so the employee is saving as well as the employer.  When the rental period ends, it’s common for ownership of the bike to pass to the employee with a small charge for the transfer.

Green Commute Initiative (GCI)

The GCI was created not only to facilitate tax savings for those serious cyclists who want to spend more than £1,000 on a bike, it was also designed to make e-bikes more accessible.  For those not familiar, an e-bike is a bike with a battery mounted on the frame that powers the bike when you need assistance.  A good e-bike can have great range and power without adding too much weight, but they come with a fairly high cost (e-bikes under £1,000 are probably not worth buying).  Pushing e-bikes is how the GCI have managed to get tax savings on bikes with no upper price limit however, it can be used for any sort of bike.

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