In light of the Coronavirus-related restrictions introduced on public transport from March, more people took to walking and cycling to get about. This was acknowledged in May when, as part of the cycle to work plan, the government introduced an emergency active travel fund. Some £250 million was made available to help people with bikes to get around.
So, as well as the obvious health and environmental impacts, what are the options and benefits of cylcing to work?
Cycle to Work scheme
The Cycle to Work scheme is not new. In fact, it has been in place since 1999. An employer can set up their own cycle to work scheme, but it works best when an employer registers with a scheme provider. Various schemes have been set up by national cycle chains.
Benefits for directors and employees
Essentially, the employer pays for the bike and then rents it to a director or employee for an agreed monthly fee and set period. These payments are free of tax and national insurance to the employer/director. Any safety equipment you need to buy, such as lights or helmet, can be included for tax relief purposes. And there’s an added bonus for the employer, who doesn’t pay any employer NIC Class 1.
Directors/employees who are basic rate taxpayers could save 32% of the overall cost of the bike. A higher rate taxpayer would save 42%. In addition, the employer could save 13.8%.
Option to buy
At the end of the ‘rental’ period employees can buy the bike for a nominal sum at the ‘market value’. Find details of the rates at: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21667a. Alternatively, check internet sites for your bike’s current market value and pay this amount instead. Be sure to keep a screenshot showing the price. Remember, this is a salary sacrifice scheme so you must earn at least the minimum wage after your deduction.
Check out the details in the Department of Transport’s handy guide: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/845725/cycle-to-work-guidance.pdf
Where the director or employee is likely to cycle mainly (over 50%) for business travel or ordinary commuting the company can purchase bikes (and safety equipment). They then lend or hire the equipment at no cost to the director/employee.
Employees do not have to keep mileage records of journeys and can use the bike for pleasure. However, you must stay below the 50% personal use limit.
Certain exclusions apply. Check them out at: https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21665
If the director/employee wants to purchase the bike, this can be done tax free by paying the ‘market value’.
Using your own cycle
You may not be in a position to buy a new bike. But perhaps there’s an old cycle lurking at the back of the shed or the garage? If you want to take up cycling again, the government’s latest scheme will be of interest.
New bike repair initiative
Under the new Fix Your Bike Voucher Scheme you can claim a £50 voucher to carry out repairs and ensure your bike is road worthy. Vouchers are available on a per person basis, limited to two per household, making a potential saving of £100.
Vouchers will be available in a phased release through the Energy Saving Trust at https://fixyourbikevoucherscheme.est.org.uk/.
To find cycle repairers near you who are taking part in the Fix Your Bike Voucher Scheme go to: https://fixyourbikevoucherscheme.est.org.uk/Home/Map
Get paid for cycling for business
If you use your own bicycle for any business journey, you’re entitled to claim 20p per mile from your employer. This is tax free under the Mileage Allowance Rules. Just keep a record of the business travel in case HMRC checks your claim.
Claim tax relief
If your employer doesn’t reimburse you, and you’ve paid tax during the tax year in question, you can claim tax relief. This applies to all relevant years. What’s more, if you haven’t claimed previously, you can claim back to 2016-2017. Claim your rebate on online using your personal Government Gateway account.
Self-employed and cycle for work?
Self-employed people can use a bike for all business journeys and treat the business element as a business expense. Alternatively, you can claim the 20p per mile for each business journey. But you can’t do both! Whatever you decide, HMRC will expect you to keep records of all business mileage.
For further advice on maximising the support available to encourage people to cycle for work, call us on 01785 243276.
Make sure you get genned up on all our Covid-19 advice here.