Cycle to work

Cycle to work is a tax incentive aimed at encouraging employees to cycle to work, thereby reducing air pollution, congestion, road danger and improving their health.

The scheme allows employees to benefit from a long term loan of bikes and commuting equipment such as lights and panniers completely tax free. Employers benefit from fitter, more punctual, more wide-awake staff. Employees benefit from better health and better bikes because their money goes further.

According to the official Department for Transport info, the Cycle to Work scheme works as follows:

  1. Your employer signs up for the scheme
  2. You then choose a bike from an approved supplier
  3. The bike is then bought by your employer who reclaims the vat
  4. You then take delivery of the bike for your exclusive use - provided you use it for qualifying journeys, i.e. commuting to work
  5. The VAT free price is then deducted from your salary by equal instalments over a period of time (typically 18 months), but as you don't pay tax or NI on the income you forego, this will give you further savings
  6. After the period of salary sacrifice, the employer may be give you the option to purchase the bike at a 'fair market valuation', though depends on the period you have had the cycle loaned to you.