Did you know as a Green Employer to promote healthier journeys to work and to reduce environmental pollution, companies can introduce a Cycle to Work Scheme, which allows Employers to loan cycles and cyclists’ safety equipment to employees as a tax-free benefit.
A Cycle to Work scheme demonstrates an Employer’s philosophy of caring for our environment by being greener. The aim of the scheme is to also boost staff motivation by helping their wellbeing by encouraging them to cycle as often as possible.
The Employer will purchase the employee’s chosen bike and safety equipment. The employee will take on a Salary Sacrifice for the cost of the equipment (less VAT).
Employees can now buy a brand new bike for far less than they would have paid themselves. The saving to an employee can be measured by the saving in Tax & NI.
Employees contribute to the cost of the bike for 12 months.
The only stipulation is that employees use the bike for at least part of their journey to work.
How it Works:
- On a salary of £18,000 on standard rate tax, your monthly gross pay is £1500.
- Purchasing a bike worth a net £600 over a period of 12-month payback period would reduce the salary by £50 each month, leaving £1450 or £17,400 a year.
- The employee is taxed after the £50 a month for the bike has been paid, removing £186 of tax and NI from the equation in the year.
- The employee has already made a VAT saving of £105 on the cost of the bike so the total saving on a bike that they would have paid £705 for in shop is £291 – a 41% saving of the purchase price.
- The savings on the cost of a bike can be substantial. The discount available to an employee depends on their personal circumstances, with those in higher tax brackets benefiting from bigger discounts.
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