Cycle to Work Scheme

[SquareDaff]

I'll do the maths at the time I think about it and base my decision on the results. With the scheme as it was this time I saved over £300 so it was a no-brainer!

 

[Cubist]

I'll do the maths at the time I think about it and base my decision on the results. With the scheme as it was this time I saved over £300 so it was a no-brainer!

Same here, £320 saved on a £1k bike

 

[Edge705]

Just bought a top spec cube mountain bike for the old man fairly trouble free the charge to me £1000 / 12 = £83.33 per month salary sacrifice - Due to NOT paying tax or NI on the £83.33 the real net cost to me (sorry my dad) is just shy of £58 - £58 x 12 = £696 - Plus additional lease (in our case) 7% £70 total cost of bike £766 so the C2W scheme gave me (sorry again my dad) a £1000 bike for £766 quid and didn't charge any interest on the 12 monthly installments

 

[BSRU]

Just bought a top spec cube mountain bike for the old man fairly trouble free the charge to me £1000 / 12 = £83.33 per month salary sacrifice - Due to NOT paying tax or NI on the £83.33 the real net cost to me (sorry my dad) is just shy of £58 - £58 x 12 = £696 - Plus additional lease (in our case) 7% £70 total cost of bike £766 so the C2W scheme gave me (sorry again my dad) a £1000 bike for £766 quid and didn't charge any interest on the 12 monthly installments

For a £1000 bike, if you take ownership of it after a year you will need to pay 25% of it's value.

 

[SquareDaff]

For a £1000 bike, if you take ownership of it after a year you will need to pay 25% of it's value.

If his scheme is like mine then he'll only have to pay the tax on the 25% final value. That's how I make such big savings on my C2C scheme.

 

[BSRU]

The HMRC clarification:-
http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm

 

[BSRU]

If his scheme is like mine then he'll only have to pay the tax on the 25% final value. That's how I make such big savings on my C2C scheme.

If the employee pays less than market value, the difference will be taxable as employment income.

This line suggests you are correct.

 

[lejogger]

Since the guidance changed, practically all the schemes are now operating in a different way... hence why some folks post on here complaining the savings are mimimal and will never use it again, while others boast of large savings still. It's totally dependant on whether you have joined a third party scheme or a direct employer scheme, and their interpretation of the HMRC guidance.

It's therefore practically impossible to offer any blanket advice that says "this is what you will pay now...", and also practically impossible to say whether any particular scheme will be worthwhile in the long run, as by the very nature of the scheme there are no guarantees around whether you will be able to take ownership of the bike at all, let alone at a price or with savings that you subjectively consider to be reasonable.

For what it's worth, my scheme has operated twice in a way which I consider to be favourable to my own circumstances and wouldn't hesitate in signing up again should I need to buy a fourth bike ()... it's just imperative that you research your own particular scheme thoroughly before signing up to make sure you know exactly what you're getting into.

 

[wiggydiggy]

If his scheme is like mine then he'll only have to pay the tax on the 25% final value. That's how I make such big savings on my C2C scheme.

Same here. My company pays Halfords to administer the scheme for them, and I could get my bike from Halfords or a list of 'preferred dealers', I believe it is called the 'P11d Tax Code Method'

The scheme is never going to beat a good interest free agreement from an LBS for a competively priced bike BUT in my eyes as someone who can't take credit (personal circumstance) it offers a convenient way to get the bike upfront and spread the cost. Although the total cost of the bike is either going to be close to or at the value of the £500 (taking into account the 12x monthly payments plus the final payment) any saving I make is on the Tax/NI as I haven't paid Tax/NI on that £500 I earnt.

What confuses things is there are apparently 3 different 'Cycle to work' schemes depending on the method being followed, so as someone's pointed out its certainly not a one size fits all scheme but if your firm offers it, its worth at least the time to investigate if it is of benefit to you.

 

[SquareDaff]

For what it's worth, my scheme has operated twice in a way which I consider to be favourable to my own circumstances and wouldn't hesitate in signing up again should I need to buy a fourth bike ()... it's just imperative that you research your own particular scheme thoroughly before signing up to make sure you know exactly what you're getting into.

What's said above! My scheme ends in July and I'll re-evaluate the scheme then to see if it's worth investing in another!

 

[lejogger]

The scheme is never going to beat a good interest free agreement from an LBS for a competively priced bike

How so? In many cases the scheme far outweighs an interest free agreement. Interest free credit on a £1k bike means you'll always pay back £1k over the period.

(Please forgive the rough calculations for the sake of the example) A well administered C2W scheme will yield savings of approx 20% income tax (for std rate tax payers - 40% for higher rate) and roughly 11% NI savings. That means a £1k bike will command a rental payment of either £690 or £490 depending on your tax classification. If you then get given the bike by your employers and pay the BIK tax through the P11d then over the following 12 months your tax bill will increase by either £50 or £100. So roughly, over the 24 month period the £1k bike will cost you either £740 or £590 with the costs spread mainly over 12 months and a small tax increase for the remaining 12.

If your scheme operates like that (as mine does) then it's a no-brainer!

 

[Edge705]

For a £1000 bike, if you take ownership of it after a year you will need to pay 25% of it's value.

Agreed but I will not be taking that option instead it will be leased for a futher 2 years hence the £70 and after that period C2W will transfer ownership or so Im told

 

[BSRU]

Agreed but I will not be taking that option instead it will be leased for a futher 2 years hence the £70 and after that period C2W will transfer ownership or so Im told

The 7% option, the one I will choose when my hire agreement finishes in April.

 

[lejogger]

Agreed but I will not be taking that option instead it will be leased for a futher 2 years hence the £70 and after that period C2W will transfer ownership or so Im told

Be careful.

After a further 2 years, the cycle will be 3 years old ( I assume your initial hire period was 12 months) therefore according to HMRC there will still be a residual value of 8% on a bike with an original cost of <£500 or 12% on a bike with an original cost >£500. If you transfer ownership for £0 then you have to ensure a p11d is completed on your behalf to declare the BIK and will be liable to pay tax on this residual value.
The residual value of the bike only becomes negligable and stops incurring a BIK liability after either 5 years for a sub £500 bike or 6 years for one costing more than £500.

 

[fossyant]

My employer is doing a £1000 (max) interest free loan instead now !