UKC

In aug i bought a bike through cycletowork scheme for £999.99.

Since then every month I've had deductions on my payslip of £75.84 'cycle to work' and £15.17 'cycle to wk VAT'. So this means over 11 payslips ive had £1001.11 taken off my pay.

Before i call HR, am i not understanding the tax system or have i managed to pay more for my bike through the cycletowork scheme?

In reply to idiotproof (Buxton MC):
Who administers the scheme?
Did you buy any safety equipment i.e. helmet as on the CTW scheme your reqired to pay VAT but not if you'd just bought it outside the scheme.

All these cycle to work schemes are for mugs in my opinion.

In reply to Indy:
Well i work for a county council but cyclescheme.co.uk is the org

Just bike. No other assessories

In reply to Indy:

The schemes aren't as good as they used to be as the old deal was 20% of the value of the bike to spend on accessories, for free, i.e you basically got the bike without VAT. You then have the price deducted from your pay, pre-tax. Therefore if you bought a £1k bike you should have that £1k deducted, saving you the relevant taxable amount on the price. However, it does seem their rounding is a little suspect as the deductions should total the value of the voucher you used.

In reply to Cloverleaf:

And over just 11 months too.

As long as it really has saved me money then its been good. I didnt compromise on the bike or the retailer to 'fit in with the scheme'. I got the bike i wanted from where i wanted it and spread the costs and hopefully saved some money.

I don't understand tax / interest etc so easily confused

In reply to idiotproof (Buxton MC):

Basically you have paid income tax on your wages minus the cycle to work repayment so over the year you have paid less tax. As a very clumsy calculation you have probably paid somwehere between 150-200 less tax over the year. Your Payroll dept at work should be able to calculate how much exactly.

In reply to idiotproof (Buxton MC):


As others have said since you pay this before tax it means you make the saving there. So it isnt immediately obvious.
That said C2W have got worse over the last few years since you still need to "buy" the bike from the company at the end of the term at a fair market value.
This used to be a piss take amount eg 1k bike at 1 year old for a tenner or something but HMRC had a sense of humour failure a couple of years back and started enforcing a true fair market value.
There are ways round this. First is take the cost as a tax hit and the latter is to extend the length of the contract until a point where the price drops to a reasonable level. Generally this means extending the contract to 3-4 years although you only pay in the first year.

In reply to KevinD:

They looked at introducing at my work, but with the new rules where you have to pay 20% (that is the last figure i have seen) any saving was gone.
Only really worth it as an easy way to spread the cost, not as a way fo saving on a bike.

In reply to Mikkel:

I thought you paid back what you borrow, over 3 or 4 years. The depreciation schedule is only to work out the fair value of the bike for tax purposes if you leave your company scheme, and have to settle up as it were.

I think it's great value. My example, bought a £500 bike, on sale with 10% off = £450. Our company work scheme had negotiated a 15% off deal with Halfords as the preferred provider, so that £450 bike costs me £382. I pay that back over 4 years, and then save tax on that amount, so in effect it's £306 if you're a basic rate taxpayer or £230 if you're a higher rate taxpayer.

My only regrets were not buying a more expensive bike, and having to find something at Halfords I liked.

In reply to Max factor:


nope. For several years it was that for all intents and purposes but then the rules changed. At 4 years though the fair market value is low. Either 3% or 7% of the bikes original cost.

In reply to idiotproof (Buxton MC):

You're paying for the bike from your income before tax.

Normally to get £1000 in your pocket you would have to earn £1000 + tax (c£250). So you're getting around £250 off the price of the bike.

Not sure why it's over 11months, there's an error there I think. Over 12months you will have paid £1092.12. Does that figure ring any bells?

In reply to KevinD:

I just checked out our T&C.

we pay over 3 years and get to 'use it for no extra cost for the 4,5 & 6 years'. Ownership transfers in the 5th year if under £500 and 6th year if over £500 pounds, when by the HMRC residual value table the bike's value is negligible. There is therefore no final additional payment or VAT to pay.

Of course, if you have to leave before the 5/6th year of the scheme, there is a BIK and VAT to pay on the amount per the schedule below.

Residual Market Value
Age of cycle Original price less than £500 Original price £500 or more
1 year 18% 25%
18 months 16% 21%
2 years 13% 17%
3 years 8% 12%
4 years 3% 7%
5 years Negligible 2%
6 years and over Negligible Negligible

In reply to Max factor:
>My example, bought a £500 bike, on sale with 10% off = £450. Our company work scheme had negotiated a 15% off deal with Halfords as the preferred provider, so that £450 bike costs me £382. I pay that back over 4 years, and then save tax on that amount, so in effect it's £306 if you're a basic rate taxpayer or £230 if you're a higher rate taxpayer.

Interesting. Admittedly its been a while since I looked at the C2W scheme and even then it was only out of interest as a colleague's son was doing it but the companies that administer these schemes charge the bicycle shops a 'fee' which meant they were all charging full retail price to customers. The most honest/transparent retailer appears to be PlanetX who say....
"We keep our prices competitive by selling at very low margins. All of these third-party organisations charge us a fee on each bike we supply to a customer for administering the scheme on behalf of your employer. An admin fee of 10% applies with cyclescheme.co.uk, On Your Bike and Bike2work vouchers, as well as Salary Extras. A 12% fee applies with Cycle Plus vouchers and a 12.5% fee applies with the NHS SME HCI scheme."

A quick look shows that pretty much every bike shop is currently showing many bikes as "on sale". Evans even has 25% off almost all Specialized inc. the top of the range di2 S-Works Tarmac's. It makes these cycle to work schemes seem very very poor value for money.

In reply to Indy:



Or your company can just administer the scheme them selves. It's not hard, you can buy the bike from anywhere, negotiate the discount just as if you were buying it yourself and my company contributes the Employers NI saving to the cost of your bike too.

In reply to idiotproof (Buxton MC):

My experience of buying a bike through a cycle to work scheme was decidedly unsatisfactory.
In the end I "saved" about 14% but was forced by my employer/scheme to use a retailer I wouldn't otherwise use who didn't set the bike up correctly, didn't offer any bike fitting service, didn't offer any proper after sales service and lied to me about the after sales service available. For about £40 extra I could have bought the bike from my LBS and had all of the above thrown I to the deal while helping out a valuable local business. And at the end of it all I still technically do not own the bike.
I wouldn't do it again.

In reply to gethin_allen:

You should add in the cost of annual insurance as well. If it's stolen you will still be liable for any outstanding amount owed to the company.

In reply to gethin_allen:

That is surely your employers fault as you were limited by the scheme they chose/set up? You still made a saving...

I work in a small company (12 employees) and asked about a bike to work scheme. I looked at the different schemes but in the end the girl in accounts/payroll said it wasn't difficult to set up in house.

I choose the bike from wherever i wanted i.e. in the sale. The company then bought the bike and now i make the payments off my top line salary before tax over my chosen period. Obviously if i leave or it's nicked it's not ideal...

As far as i know there is no reason to use an actual "scheme" it just takes away all the admin from your employer which i can see in a bigger company would be desirable.

A good deal for me anyway.

In reply to Mark020:

I agree,

You still made a saving...
As I explained, it was only a saving on their terms, ie. The bike could have been sourced cheaper than the price put on it by the scheme providers and I paid a bit less but I'd have preferred to have paid the difference of ~£50 for the better service.


I can see this being the reason with my employer, anything to avoid doing useful work.