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The Bike to Work Scheme offers tax incentives that enable your staff to enjoy serious savings on the price of a new bicycle (plus related safety equipment such as a helmet and a set of lights).
Once you sign up for a Bike to Work Scheme in partnership with Edinburgh Bicycle Co-op, your employees will have the opportunity to lease the bicycle of their choice via a tax-efficient salary sacrifice scheme.
The hire period – typically 12 or 18 months – will be at your discretion.
Savings for the employer
As well as boosting morale by offering a life-enhancing tax-efficient staff perk, the Bike to Work Scheme offers tangible benefits to the employer.
Your organisation can save £138 in Employer National Insurance contributions for every £1,000 spent on the purchase of bicycles and equipment.
|Number of employees||5,000|
|Number of employees joining||200|
|Percentage take up||4%|
|Average cost of bike & equipment||£700|
|Employer NI savings||£19,320|
This table assumes NI is calculated at 13.8%. Examples & figures based on tax year 2015/16.
Savings for the employee
Under a salary sacrifice scheme, the employee agrees to a reduction in pay. In return, the employer provides a non-cash benefit – in this case the use of the bicycle over the hire period.
Salary sacrifice effectively reduces the proportion of the employee’s salary that is liable for income tax and National Insurance. Hence the savings, which are best illustrated by a simple example.
The employee chooses a £600 bike to be leased over 12 months.
The employer purchases the bicycle, then leases it back to the employee. The employee therefore agrees a salary sacrifice of £50 a month. Because this comes off the gross pay, the employee’s net pay will only be reduced by approximately £34, thanks to the tax and NI savings.
The amount saved is dependent on the employee’s personal tax band so he or she can save even more (over 40% if they are a higher tax payer). At the end of the hire period, the employer has various options for dealing with the transfer of ownership.
These include selling the bicycle to the employee at Fair Market Value or simply not transferring the ownership of the bike and allowing the employee to continue to use the bike free of charge.