Business Accountant

Home » Assets » The tax advantages of cycling to work

The tax advantages of cycling to work

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 7,595 other followers

Archives

Categories

cyclist isolated on white

Summer is nearly over but 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

The Employee can buy the Cycle from the company for a price set using the HMRC valuation table below

Age of cycle Acceptable disposal value percentage
Original price of the cycle less than £500 Original price £500+
1 year 18% 25%
18 months 16% 21%
2 years 13% 17%
3 years 8% 12%
4 years 3% 7%
5 years Negligible 2%
6 years & over Negligible Negligible

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

So as the saying goes ‘get on your bike’

steve@bicknells.net


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow Business Accountant on WordPress.com

Enter your email address to follow this blog and receive notifications of new posts by email.

%d bloggers like this: