Cycle to Work scheme: everything you need to know

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<img src="https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=45&resize=620,413" srcset="https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=45&amp;resize=2400,1598 2400w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=45&amp;resize=1920,1278 1920w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=45&amp;resize=1440,959 1440w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=45&amp;resize=1200,799 1200w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=90&amp;resize=960,639 960w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=90&amp;resize=720,479 720w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=90&amp;resize=576,383 576w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=90&amp;resize=360,239 360w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1427309171827-1aup26vkkgf57-d571d73.jpg?quality=90&amp;resize=180,119 180w, " sizes="(max-width: 620px) 100vw, 620px" width="620" height="413" class="wp-image-3271 alignnone size-landscape_thumbnail" alt="Road cyclist" title="Cycle to Work" /> <p class="firstpara">The Cycle to Work scheme is a great way for UK cyclists to save up to 42 percent off the cost of a bike. Let’s have a look at how it works and whether you’re eligible.</p>
<ul>
<li><a href="http://www.bikeradar.com/commuting/gear/article/whats-the-best-bike-for-cycle-commuting-29898/">What’s the best bike for cycle commuting?</a></li>
<li><a href="http://www.bikeradar.com/road/gear/article/10-tips-for-safer-city-cycling-47029/">11 tips for safer city cycling</a></li>
</ul>
<p>In essence, your employer buys a bike for you to ride to work, you ‘hire’ it through salary sacrifice (which is where you save by not paying tax and National Insurance on the monthly fees) and at the end of the ‘hire’ period you buy the bike from your employer.</p>
<p>In other words, your salary sacrifice is made from your gross salary, not your net salary.</p>
<p>Hundreds of thousands of people have already bought a bike on the scheme, which was introduced as a tax exemption in 1999 by the government to ‘promote healthier journeys to work and reduce environmental pollution’.</p>
<p>Because it was set up to promote work journeys rather than cycling in general, your employer technically remains the owner of the bike once you finish the hire period.</p>
<p>Everyone knows that in practice the employee is ‘buying’ the bike, but that isn’t legally the case until the salary sacrifice ends and the employer ‘sells’ the now heavily depreciated equipment to the employee.</p>
<p>In the past, few employers have bothered with the final sale transaction because it was a hassle, so many employees didn’t have to make a final payment. However, that changed a few years ago <a href="https://www.theguardian.com/lifeandstyle/2010/aug/13/cycle-to-work-scheme-bargain-ends">with HMRC clarifying</a> that bikes needed to be sold at Fair Market Value so as to avoid the scheme being a tax loophole.</p>
<p>Third-party providers, such as <a href="http://www.cyclescheme.co.uk/help/faqs/end-of-hire">Cyclescheme</a>, now usually offer a variety of options: pay a small refundable deposit to re-hire the bike for three more years (after which the bike is yours for free), pay the fair market value (normally about 18 percent or 25 percent of the certificate value of the bike), or return the bike.</p>
<h2>How does the Cycle to Work scheme work?</h2>
<div class="img-container img-container–landscape-thumbnail"><img src="https://images.immediate.co.uk/production/volatile/sites/21/2019/03/best-folding-bike-1464346584121-uhxy0tsu5c4s-1479979152603-1500iwvbsqlt3-4e974e8.jpg?quality=90&amp;lb=620,413&amp;background=white" srcset="https://images.immediate.co.uk/production/volatile/sites/21/2019/03/best-folding-bike-1464346584121-uhxy0tsu5c4s-1479979152603-1500iwvbsqlt3-4e974e8.jpg?quality=90&amp;lb=1456,969&amp;background=white 1456w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/best-folding-bike-1464346584121-uhxy0tsu5c4s-1479979152603-1500iwvbsqlt3-4e974e8.jpg?quality=90&amp;lb=1112,740&amp;background=white 1112w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/best-folding-bike-1464346584121-uhxy0tsu5c4s-1479979152603-1500iwvbsqlt3-4e974e8.jpg?quality=90&amp;lb=940,626&amp;background=white 940w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/best-folding-bike-1464346584121-uhxy0tsu5c4s-1479979152603-1500iwvbsqlt3-4e974e8.jpg?quality=90&amp;lb=728,484&amp;background=white 728w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/best-folding-bike-1464346584121-uhxy0tsu5c4s-1479979152603-1500iwvbsqlt3-4e974e8.jpg?quality=90&amp;lb=556,370&amp;background=white 556w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/best-folding-bike-1464346584121-uhxy0tsu5c4s-1479979152603-1500iwvbsqlt3-4e974e8.jpg?quality=90&amp;lb=355,236&amp;background=white 355w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/best-folding-bike-1464346584121-uhxy0tsu5c4s-1479979152603-1500iwvbsqlt3-4e974e8.jpg?quality=90&amp;lb=340,226&amp;background=white 340w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/best-folding-bike-1464346584121-uhxy0tsu5c4s-1479979152603-1500iwvbsqlt3-4e974e8.jpg?quality=90&amp;lb=320,213&amp;background=white 320w, " sizes="(min-width: 992px) 940px, (min-width: 768px) 728px, (min-width: 576px) 556px, calc(100vw – 20px)" width="620" height="413" class="wp-image-3262 alignnone size-landscape_thumbnail img-container__image" alt="Some local bike shops will happily sell you a more expensive bike for £1,000, so long as you make up the difference with them" title="Adult businessman carrying folding bicycle" data-source-name="Image Source"></div>
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<figcaption class="wp-caption-text"><span class="caption-copy"><i class="icon-arrow icon-camera-circle"></i> Some local bike shops will happily sell you a more expensive bike for £1,000, as long as you make up the difference with them</span></figcaption><span class="im-image-caption"> <i>Image Source</i></span>
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<p>For the first 20-years of the scheme it was widely assumed that your employer could buy the bike of your choice only up to a value of £1,000. However in June 2019 the <a href="https://www.gov.uk/government/news/government-ushers-in-new-era-of-green-commutes-with-e-bike-cycle-to-work-scheme">Department of Transport sought to clarify</a> that, in fact, if the bike shop you use or your employer is registered with the Financial Conduct Authority then you can choose a bike and equipment worth more than a grand.</p>
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<span class="pullquote__icon pullquote__icon–left icon-pullquote" data-grunticon-embed></span>Various scheme providers have come up with ways to minimise the final cost of the bike<span class="pullquote__icon pullquote__icon–right icon-pullquote" data-grunticon-embed></span>
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<p>The clarification was in response to the general increase in bike prices over the past two decades, but also in a bid to encourage more employees to switch to electric bikes — few of which cost less than a £1,000.</p>
<p>Because payments are made from your gross salary you pay less income tax and National Insurance, hence making savings.</p>
<p>At the end of the 12-month ‘hire’ period, you buy the bike from your employer for its HM Revenue &amp; Customs (HMRC) approved Fair Market Value (FMV).</p>
<p>This is a change from the previous end-of-scheme payment, where you just paid five percent of the value of the bike to your employer.</p>
<p>However — as mentioned above — various scheme providers have come up with ways to minimise the final cost of the bike.</p>
<p>One is to extend the loan period past one year, thereby allowing one of the heavier depreciation figures to be used. The other solution involves paying the tax on the Fair Market Value.</p>
<h2>Do I have to ride My Cycle to Work bike to the office every day?</h2>
<div class="img-container img-container–landscape-thumbnail"><img src="https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1446720644424-1dulxqmylbkvm-62ddeed.jpg?quality=90&amp;lb=620,413&amp;background=white" srcset="https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1446720644424-1dulxqmylbkvm-62ddeed.jpg?quality=90&amp;lb=1112,740&amp;background=white 1112w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1446720644424-1dulxqmylbkvm-62ddeed.jpg?quality=90&amp;lb=940,626&amp;background=white 940w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1446720644424-1dulxqmylbkvm-62ddeed.jpg?quality=90&amp;lb=728,484&amp;background=white 728w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1446720644424-1dulxqmylbkvm-62ddeed.jpg?quality=90&amp;lb=556,370&amp;background=white 556w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1446720644424-1dulxqmylbkvm-62ddeed.jpg?quality=90&amp;lb=355,236&amp;background=white 355w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1446720644424-1dulxqmylbkvm-62ddeed.jpg?quality=90&amp;lb=340,226&amp;background=white 340w, https://images.immediate.co.uk/production/volatile/sites/21/2019/03/1446720644424-1dulxqmylbkvm-62ddeed.jpg?quality=90&amp;lb=320,213&amp;background=white 320w, " sizes="(min-width: 992px) 940px, (min-width: 768px) 728px, (min-width: 576px) 556px, calc(100vw – 20px)" width="620" height="413" class="wp-image-3267 alignnone size-landscape_thumbnail img-container__image" alt="There are some beautiful commuter bikes out there, such as this Foffa" title="Cycle to Work" data-source-name="Joe Branston / Immediate Media Co."></div>
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<figcaption class="wp-caption-text"><span class="caption-copy"><i class="icon-arrow icon-camera-circle"></i> There are some beautiful commuter bikes out there, such as this Foffa</span></figcaption><span class="im-image-caption"> <i>Joe Branston / Immediate Media Co.</i></span>
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<p>Relax, no one is going to be checking up on you to see how often you’ve ridden it.</p>
<p>Of course, the idea is that it’s used to ‘promote healthier journeys to work and reduce environmental pollution’, so using it as part of your commute is the obvious goal.</p>
<h2>Why use the Cycle to Work scheme?</h2>
<ul>
<li>You’ll live longer — says the <a href="http://www.nhs.uk/livewell/fitness/pages/physical-activity-guidelines-for-adults.aspx">NHS</a>
</li>
<li>It saves the entire CO2 output of a city the size of Hereford each year</li>
<li>
<a href="http://www.bikeradar.com/road/gear/article/how-to-lose-weight-cycling-28026/">Cycling to work can help you lose weight</a>: you’ll burn between 75 and 670 calories a journey, obviously depending on how far your journey is (according to <a href="http://www.weightlossresources.co.uk">www.weightlossresources.co.uk</a>)</li>
<li>
<a href="http://www.bikeradar.com/gear/article/why-cycling-makes-you-happy-25607/">It’ll make you feel happier</a>, getting you outside in the sunshine boosting your levels of vitamin D</li>
<li>You’ll save money on commuting while also easing congestion</li>
<li>And we’ve got at least <a href="http://www.bikeradar.com/road/gear/article/30-reasons-to-take-up-cycling-23965/">another 30 reasons to take up cycling</a>
</li>
</ul>
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