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The Cycle to Work scheme is a government initiative. The idea, introduced as a tax exemption in 1999 to "promote healthier commuting and reduce pollution", was to encourage more people to get on bikes. The cost savings for UK employees is that they save income tax and NI on the cost of the bike. In this article we will describe a cycle to work scheme calculator so you can find out how much your bike would cost you per month on the cycle to work scheme.
Cycle to work scheme: what is it?
This is a state scheme in which the government subsidizes the purchase of bicycles by citizens. And it does not directly do this with citizens, but through your employer. That is, primary, you need to ask the employer if he has such a scheme, and then you can already join it.
As the name suggests, the goal of this scheme is to get as many people on bikes as possible. So that instead of using public transport and personal vehicles, people ride pedal horses. In general, everything is aimed for a great and green future.
As we said, the scheme allows you to save almost half the price of a bicycle and uniforms. To be precise, from 32 to 47%. And the amount of savings will directly depend on how expensive your bike is.
We would like to add that not only bicycles are available on the cycle to work scheme. It also includes any bicycle accessories, as well as spare parts for the bicycle. Therefore, under this scheme, you can not only buy your bike, you can collect a variety of equipment or vice versa spare parts to improve your bike or just build your new one from scratch. In the past, cycle to work scheme calculator had a maximum budget of £1,000. It allowed employees to spend £1,000 on:
only bike
only accessories
outfit and bike together.
Now, by standard, all employers who enter this scheme will have an unlimited budget. But if your employer forcibly set a budget of £1000, £2000 or more, then it is needed to ask each individual employer.
Read also our article about how to choose ladies electric bike [in 2022]
Cycle to work scheme: how it works?
If your employer is part of this scheme, you simply ask him how you can get into the cycle to work. You are given a link and you simply go to the website of the seller with whom your employer has established contact and choose your bike there as well as any additional accessories.
Firstly, you choose a bike and all the necessary accessories, and send the order to your HR-manager. How will you pay for all this? This is probably the question that worries everyone the most. The price of the bike and all the additional equipment that you have collected is divided into 12 parts and you pay for 12 payments. That is, during the year you pay for everything that you have purchased. And most importantly, you pay this out of the money you have after taxes. The money for the bike comes from your pre-tax paycheck, so it lowers the amount you pay in taxes. And this is your savings.
Now you understand the relationship between the total order you place and the final level of savings. The more you buy, the more money will be thrown from paycheck to taxes, the more taxes you will not pay.
Cycle to work scheme calculator
Table 1. Cycle to work scheme calculator for an intermediate rate taxpayer, assuming 21% tax and 12% NIC on salary up to £43,430pa.
Bike value, £ | Monthly Reduction in Net Pay* | Net Cost of Leasing the Bike** |
300 | £16.75 | £201 |
400 | £22.34 | £268 |
500 | £27.92 | £335 |
600 | £33.50 | £402 |
700 | £39.09 | £469 |
800 | £44.67 | £536 |
900 | £50.25 | £603 |
1000 | £55.84 | £670 |
*Figures rounded to nearest 1 Penny.
**Figures rounded to nearest £1.
Table 2. Cycle to Work scheme for higher rate taxpayer, assuming 41% tax and a 2% NIC
Bike value, £ | Monthly Reduction in Net Pay* | Net Cost of Leasing the Bike** |
300 | £14.25 | £171 |
400 | £19.00 | £228 |
500 | £23.75 | £285 |
600 | £28.50 | £342 |
700 | £33.25 | £399 |
800 | £38.00 | £456 |
900 | £42.75 | £513 |
1000 | £47.50 | £570 |
Let's look at and calculate the savings on the example of a bicycle, a backpack and a helmet. The approximate price for such a set would be about £1000. And in the end you will save about £300 for these 12 months. These are all interest-free payments, that is, it’s not the bank that earns money on you, but the government puts everyone on wheels with this scheme.
Cycle to work scheme: pitfalls
But then there are small pitfalls. It may seem to you that they took money from you for 12 months and now at the end the bike will be yours. But in fact, no, the bike does not become yours because in the process, while you pay, you rent it from the company. And it will continue to be rented for 6 years.
That is, you stop paying after 12 months, but the bike is still the property of the company. You can continue to use it for free (and that's basically what everyone does). But if you suddenly decide to leave or the employer fires you, then you will be asked to return it. Because during these 6 years it will be listed as an added bonus from your employer and you don't own it. It's funny, but in addition to the free continuation of the lease, you have two more options:
Give the bike back and join a new cycle that work scheme
Redeem this bike for its fair market price, which is 25% of its original price.
Cycle to Work providers in UK
There are several trustworthy Cycle to Work providers in UK:
Our GIN X is currently working with 2 providers: Cycle Scheme and Bike2Work Scheme. You can use one of them to become a proud owner of GIN X electric bike.