Cycle to Work Scheme

What is the Cycle to Work Scheme?

The Cycle to Work Scheme is a UK government initiative that encourages employees to cycle to work. It’s a tax-exempt scheme allowing employers to loan employees bikes and gear tax-free.

The scheme was part of the government's green transport plan. The plan aims to cut pollution and promote healthier living.

How the Cycle to Work Scheme Works

The Cycle to Work Scheme operates under the UK's salary sacrifice schemes. This means employees agree to give up some of their salary for a non-cash benefit. For example, a bike and cycling gear.

The amount sacrificed is usually equal to the cost of the bike and equipment spread over a defined period. This initiative champions healthier and eco-friendly commutes. It also eases the cost of cycling which can be expensive, especially when starting out.

The Mechanics of Cycle to Work Schemes

Under the scheme, employers buy cycling equipment on behalf of their employees. Including bicycles, helmets, safety gear, you name it. Just be sure to check with your provider for any items that could be excluded. This could be bike computers, power metres, or action cameras. 

Once purchased, the gear is provided to the employee under a hire agreement. 

The cost is then subtracted from the employee's gross salary. This saves on tax and National Insurance.This arrangement not only supports healthier lifestyles but also introduces cost-effective commuting options.

Grab Equipment and Accessories too!

A big win for the Cycle to Work Scheme is that you can include lots of cycling-related gear, beyond just bikes.You can access helmets, bike locks, lights and even cycling gear like cycling clothing and safety equipment, making riding your bike safer and more enjoyable. The scheme’s flexibility means you can choose from a wide range of bikes and accessories, making it accessible to every rider’s needs.

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Financial Cap and Consumer Credit Licence

The scheme typically has a financial cap, with £1,000 being a common limit for the value of equipment that can be loaned to an employee.

However, employers holding a consumer credit licence can offer higher-value items, allowing employees to get higher-end bicycles and accessories at a reduced cost. 

Laka’s Cycle to Work provider, Green Commute Initiative, has a licence with the Financial Conduct Authority (FCA) meaning there’s no upper limit.

Eligibility Criteria

Eligibility for the scheme requires individuals to  be employees paying income tax through the PAYE system. It's designed to benefit those in formal employment arrangements. It doesn’t apply to the self-employed or individuals outside the tax-paying system.

The scheme suggests that the bike and gear are primarily used for commuting to and from work. So the initiative remains focused on promoting cycling as an alternative to motor vehicle commutes.

What are the Benefits of the Cycle to Work Scheme?

The Cycle to Work Scheme is a fantastic initiative offering loads of benefits for employers and employees. It promotes a healthier, more sustainable mode of transportation. This scheme allows financial savings and contributes to environmental conservation and employee well-being.

For Employees

• Make Financial Savings: Significant savings on income tax and National Insurance contributions make purchasing cycling gear more affordable.
• Spread The Cost: The cost of the bike and accessories is spread over monthly payments, easing the financial burden.
• Access Quality Equipment: Means employees can purchase high-quality bikes and cycling accessories at a reduced cost.
• Have A Healthier Commute: Promotes physical health through regular cycling, contributing to overall well-being.
• Lower Your Environmental Impact: Contributes to lowering carbon footprints by offering an eco-friendly alternative to petrol-powered commutes.
• Choose From A Wide Selection: Access to a huge range of bikes, including electric bikes, road bikes, mountain bikes, and hybrid bikes, as well as safety equipment like helmets and lights.

For Employers

• Get a Healthier Workforce: Cycling to work can improve physical health and mental well-being among employees, potentially reducing sick days.
• Increase Productivity: Regular physical activity, such as cycling, has been linked to improved concentration and work performance.
• Meet Environmental Goals: Supports the company’s sustainability objectives by reducing the carbon footprint and reliance on car travel.
• Fix Parking Problems: Reduces the demand for car parking spaces, easing facility management.
• Get Employee Engagement: Offering the Cycle to Work Scheme can enhance employee satisfaction and loyalty by providing valuable benefits.
• Enhance Corporate Image: Demonstrate a commitment to employee welfare and environmental responsibility, improving public perception.

How to Kickstart a Cycle to Work Scheme in 6 Easy Steps

Getting a Cycle to Work Scheme off the ground is a fantastic way for businesses to support their teams in embracing a healthier, more eco-friendly commute. Here are the simple, actionable steps to getting started.

1. Find the Perfect Scheme Provider

The first step is picking a provider that ticks all the boxes. You want one with a great selection of bicycles and gear, top-notch customer service, and an easy-to-navigate system for you and your employees. 

Some providers throw in extras like bike maintenance and insurance, which could be great perks for your team, but check if these extras affect the cost.

2. Spread the Word

With your provider chosen, it's time to let everyone know. Use every channel you've got—emails, intranet posts, staff meetings—to share the exciting news. Ensure the information is clear and engaging to get everyone excited about the benefits of cycling to work.

3. The Application Dance

Next, employees will need to apply for the scheme. They pick their gear, submit an application through the provider's platform, and then it's over to you for approval. This step ensures everyone understands what they're signing up for.

4. Gear Up

Once you’ve given the green light, it’s shopping time. You’ll purchase the chosen bikes and accessories on behalf of your employees. This is where the real fun begins as employees envision their new commute.

5. Sorting Out the Finances

The cost of the bikes and gear is covered by reducing the employee's salary before tax over a set period—usually a year. Make sure this process is as transparent as possible, explaining how it affects their salary and the tax benefits they’ll gain. 

At the end of the hire term, you’ll also need to handle the transfer of ownership according to the scheme's guidelines.

6. Keep it Rolling

The final step is all about keeping the scheme running smoothly. This includes ongoing promotion, approving new applicants, and ensuring everything stays within the law and scheme rules. Regular check-ins on the scheme can help keep it fresh and beneficial for everyone involved.

What Happens at the End of Hire Period?

As the Cycle to Work Scheme hire period draws close, employees have several options regarding their leased cycling equipment. This Is vital for making decisions that align with personal and financial needs.

• Return the Equipment

Employees can opt to return the bike and any accessories to the employer. This choice involves no additional cost and allows the employer to decide on the next steps for the equipment, whether re-hiring, selling, or otherwise disposing of it. This option suits those who might want to upgrade or no longer need the bike.

• Extend the Hire Period

Extending the hire agreement offers employees who are not ready to say goodbye a way to keep the bike longer. This can be particularly appealing for those who are still enjoying their bike but are unprepared to commit to a purchase.

• Purchase the Equipment

If an employee has grown fond of their bike, they can buy it at its fair market value. The price is typically based on the bike's age and condition. While this route foregoes further tax benefits, it allows employees to own the bike outright for personal use.

A Greener Tomorrow

The Cycle to Work Scheme is a brilliant initiative that promotes healthier commuting and reduces environmental pollution. It significantly benefits employers and employees, making it a worthwhile consideration for any business.

Setting up and managing a Cycle to Work Scheme requires effort and administration. However, it can be a straightforward and rewarding process with the right provider and a clear understanding of the rules and benefits.