It might be cold now, but spring is just around the corner and cycling could be just the thing help you keep fit, save money and be kind to the environment.
HMRC like cyclists too, so what do you need to do to qualify for tax savings.
First you will need to get your employer to participate in the scheme, they can do this either by setting up their own scheme or by using www.cyclescheme.co.uk or http://www.bike2workscheme.co.uk/ there are lots of other similar sites too.
The basic rules are:
You must use the bike and/or safety equipment mainly (more than 50 per cent of the time) for ‘qualifying’ journeys. This means a journey or part of a journey:
• between your home and workplace
• between one workplace and another
• to and from the train station to get to work
Taking part in the scheme means that you don’t have to pay a lump sum up front to buy a bike and/or safety equipment. Instead, you could loan the bike and/or equipment from your employer, usually up to the value of £1000.
Making loan repayments
Your employer may want to recover all or part of the cost of loaning you the bike and/or safety equipment. If so, you would then make loan payments back to your employer over an agreed period (typically 12 to 18 months) to spread the cost.
The loan payments are usually taken out of your salary through a ‘salary sacrifice’ arrangement. This means you agree to accept a lower amount of salary in return for a benefit - the loan of a cycle and/or safety equipment.
Example of savings using Salary Sacrifice:-
Cost of bicycle: £500
Cost of accessories: £100
Total cost: £600
Income Tax 20% £120
Employee National Insurance 12% £72
Total Employee Saving £192
Your employer will save Employers National Insurance of 13.8% on the salary sacrificed.
In addition you can claim an HMRC mileage allowance for Cycling of 20p per mile and if you employer doesn’t pay the allowance you can claim back the tax on the allowance using form P87 http://www.hmrc.gov.uk/forms/p87.pdf
If you have ‘Cycle to Work’ days your employer can provide free meals and refreshments for cyclists.
For more information employees should speak to their payroll department at work and employers can ask their accountants for advice on how to set up a scheme.