Cycle To Work scheme question

[pinkkaz]

Hello, I have a query!

I'm going to be leaving my job next September to train to be a teacher, but would like to get a(nother) bike on the cycle to work scheme which starts in April.

Does anyone know if, when I leave, I have to pay the full amount back to work including tax? Obviously it's not worth doing if so - I may as well get a bike now on an interest free credit card or something *rubs hands*.

What about if I leave work after just one month on the scheme...?

Cheers!

 

[iacula]

I can't speak for your scheme, but I would suspect you'd have to pay back to your employer the full outstanding amount when you leave including the tax saving. That is how our scheme works. So I'd wait until you start your new job.

 

[jack the lad]

This is what our scheme says. I guess this is standard. Basically you pay the balance out of taxed income. It could still be worth it for 6 months, saving half the tax.

"What happens if I leave my job before I have paid fully?​

If you leave you job or retire, your bike becomes a taxable benefit. The
balance remaining on the price of your bike will be deducted from your final
net salary. As these will no longer be part of the salary sacrifice you will not​

save the income tax or National Insurance on the remaining balance."

 

[HF2300]

The reason you save is because your gross salary is reduced by the amount of the payments. That means part of the payment comes from the chunk that's going to the taxman, rather than your pocket.

If you leave work during the scheme the final payment is just a payment, it's not deducted from your PAYE, so there's no tax saving to be made; and as iacula says, it'll be the outstanding amount the employer's still owed, plus VAT if the employer's VAT registered.

If your employer is VAT registered and deducts the VAT to start with, and you run the scheme for a few months, you'll still make a saving, it just might not be all that big.

 

[pinkkaz]

Aha,

Thanks all, that makes perfect sense. iacula, I'm off to uni (if I get in somewhere!) so no new job. If only they had a similar scheme for students.

This is making me want to apply for an interest-free credit card so I can get the coveted Ridgeback Panorama...

 

[HF2300]

Don't forget, though, Kaz, if you start CTW then stop after a few months you'll still have saved, while with interest free credit you're still paying the asking price. Having said that, if it's only a month as you say, it's not worth it - 5 months (April - August) might be though, plus you could use that 5 months* to save money towards the final payment.


*or 5 moths, as I typed originally...

 

[pinkkaz]

Don't forget, though, Kaz, if you start CTW then stop after a few months you'll still have saved, while with interest free credit you're still paying the asking price. Having said that, if it's only a month as you say, it's not worth it - 5 months (April - August) might be though, plus you could use that 5 months* to save money towards the final payment.


*or 5 moths, as I typed originally...

Yes that's true, but the other thing is that I don't want to feel too tied to my job if I decide to quit my job early and temp for a few months for more pay (a bit of a scary prospect in this climate).

Actually, i think the main reason is I just don't want to wait til April for my new bike but I expect that's what I'll end up doing!

 

[pinkkaz]

Can you overpay?

That might just be too complex for my employer but I'd be interested to know the answer.

 

[Riding in Circles]

I should be possible to run it over 6 months rather than 12, you should contact Cyclescheme and ask them.

 

[HelenD123]

Is the bike you've seen full price? It might be cheaper just to find a good deal on the bike rather than paying full wack through cycle to work if you won't be taking full advantage of the scheme.

 

[HF2300]

Can you overpay?

That's a good point. As far as I know if you're dealing direct you can go for any length of agreement you want, up to 18 months (there are legal reasons why agreements longer than 18 months are a problem).

From the DfT guidance:

'There is no fixed time period for which cycles and cyclists' safety equipment must be loaned under a Cycle to Work scheme. Similarly, there is no fixed time period for which a salary sacrifice scheme must run where one is used to offset the cost of loaning the cycle and cyclists' safety equipment.'

I think the reason 12 months is normally chosen is to balance reasonably fast repayment with reasonably sized payments. Some facilitators do offer 12 or 18 month agreements.

Of course, if you're going through a facilitator you're limited to what they offer, and if your employer is dealing direct you're limited to what they can be bothered with.