cycle to work

What is the cycle to work scheme?

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The cycle to work scheme, one of the most popular salary sacrifice schemes, supports those who want to commute to and from the office on two wheels.

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The way it works is simple. Employers who opt into the scheme provide their employees with a bicycle and safety equipment (like lights, helmets and locks) free from tax and national insurance. 

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So the benefits are twofold: employers can promote health and wellbeing among their employees by encouraging an active method of travel to work. Meanwhile, employees can enjoy savings as they don’t have to pay tax and national insurance on their equipment. The cost savings differ depending on the provider you use, but many retailers – like Halfords – offer a savings calculator on their website.

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How does the cycle to work scheme work?

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If you’re an employer and want to offer the cycle to work scheme, you’ll need to set up an agreement (a type of salary sacrifice scheme) with your employees who want to join. This should cover the length of the loan, the cost of the bike and any rules associated with the scheme. 

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Either the employer will buy or lease the equipment from a retailer, or the employer will use a third party (like Cyclescheme) from whom employees can rent the goods directly. Even better, while the cycle to work scheme limit used to be £1,000, there’s no longer a cap on the value of bikes and equipment that can be used!

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The employee will then pay for the cost of the equipment in instalments from their gross salary. The employee will make a saving on tax and national insurance on the cost of the loan, due to a process called salary exchange. The employee is then free to use the bike and equipment for the duration of the agreed loan period (typically at least 12 months).

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At the end of the hire period, the employee can either extend the hire agreement, return the bike and equipment, or buy it outright under a separate agreement.

The benefits of the cycle to work scheme

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There are tonnes of benefits to both the employer and the employee, such as:

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• Improved health and wellbeing – Cycling to work is a much more active travel method than driving or taking public transport. Cycling makes us mentally sharper, increases calorie burn, helps us to manage stress and anxiety, and makes it easier to switch off in the evenings. Every year, illness as a result of physical inactivity costs the NHS up to £1 billion – what better way to improve your physical fitness than by hopping on your bike to work?

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• Boosted staff morale - Thanks to these health benefits, cycling to work can make employees happier and more motivated. That’s because exercise releases feel-good hormones, which stick around long after you get off your bike.

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• Increased productivity - Cycling to work can help employees to arrive at work in a more positive and energetic state, increasing their productivity for the rest of the day. This bodes well for employers as they’re likely to get the best out of their employees.

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• Sustainable travel – The cycle to work scheme offers an environmentally friendly way of travelling. Not only does it lower your carbon footprint, it also reduces road traffic and noise pollution and improves air quality for everyone. There’s a reason why we ranked it in our top 5 employee benefits that help the plant, after all…

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• Cost savings – Of course, employees are already saving money thanks to the salary sacrifice scheme. But cycling to work means they’ll also save on petrol and parking costs, or the cost of public transport if they bus or train into work.

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Are there any criteria to be eligible to cycle to work?

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If you’re thinking of setting up a cycle to work scheme, there are a few rules to bear in mind:

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• Employees must be aged 16 or over
• Employees must earn at least minimum wage after the salary sacrifice has been taken from their pay
• Employees must be given a minimum loan period of 12 months, and a maximum period of 3 years
• The bike must legally belong to the employer until the loan is repaid
• The bike must be used for commuting to and from work
• The employee must agree to a repayment schedule before taking the bike home
• The employer can terminate the loan agreement at any time

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Read up on the government’s guidance for employers looking to offer a cycle to work scheme here.