or if i was to buy a £750 bike what is the [b]actual[/b] cost to me?
i was working on 50%, but i'm now unsure with the new rules/guidelines
Ta
Dave
Hi Dave,
Based on £1000 voucher:
My wage packet today had my first C2W payment off it - £8.50 a week less take home pay
£8.50 x 78 weeks = £663 + 10% of the initial voucher value (i think) £100
Total: £763
🙂
That 10% of the initial voucher thing is old.
Your final payment is now based on market value and can be anything up to £250 depending upon the initial value of the bike. The longer your scheme runs, the less there will be to pay.
anything up to £250
[u][b]Holy Smoke! [/b][/u]
Surely not - That would mean no saving at all ( in my case )
When did the scheme change? I got my bike on the C2W scheme end of 2010. Back then it was 50% saving.
In our work, this time round is the first with the changes.
I had one a few years back, i paid it over 18 months and there was a final payment of around £50.
This time, it's still paid over 18 months, but there is an 18 month delay for the final payment - not even sure how much it will be 🙁
Think i paid around £700, maybe £750 in total back then.
It was never 50% saving!
It changed in 2011.
The only way you would have got a 50% saving would be as a higher rate tax payer.
Most folk have no idea how much they will end up paying. I must have explained it over 100 times to customers in teh LBS I worked in.
FWIW, I reckon that if you have the money up front you'll get a better deal going direct to a shop of your choice and offering to pay cash, especially if you are willing to accept "last years" model.
Just paid my final 'rental fee' of £57.40.
I got a package worth £820. Been paying £35 per month for 12 months, (= £420) + £57.40 = £477.40.
£820 - £477.40 = a £342.60 saving.
BUT, I still have to keep the goods for 3 years. I couldv'e paid a final fee of £205 which would mean I could do whatever I wanted with the goods.
Also I'm with Cyclescheme, dunno if thats the same as CTW.
It depends on what your employer does with the bike at the end of the scheme.
For example, I got a £1000 bike. I pay monthly tax free. I pay 40% tax so the saving is 40% of the total price incl VAT. At the end of the 12 months my employer gives me the bike. HMRC see this as a taxable benefit, and estimate the bike to be worth £250. They make me pay income tax on that taxable benefit, which is 40% of £250 (£100.) In total I pay £680 for a £1000 bike.
I think it's employer-dependent - mine has some funny arrangement.
1) I'll pay 80% of the full value split over 8 months
2) The "fair market value" final payment is another 25% of the total cost.
Overall I'll pay 105% of the value of the bike, but obviously pre-tax.
Total cost is £1050 * 0.6 (since I pay 40% tax) = £630.
This seems to be as good a deal as anything I've seen elsewhere, I'm not quite sure how they work it out like this. It's a big scheme via an NHS trust, by the way.
The savings depend entirely on how your company run the scheme - there's no one right way to do it.
There have been two changes to the scheme. Late 2010, HMRC made it clear that the final transfer fee had to be a fair price for the bike. Most schemes have reduced the impact of this by deferring transfer until the end of 3 years or so, when the bike has depreciated further, and by charging less than fair market value and treating it as a taxable benefit.
The second change was to require the payments to your employer to be subject to VAT. This came into effect Jan 2012.
Our company scheme offers overall 35% saving for basic rate, and 43% for higher rate. Prior to the VAT change it was something like 45%/52%.
1) I'll pay 80% of the full value split over 8 months
2) The "fair market value" final payment is another 25% of the total cost.
Overall I'll pay 105% of the value of the bike, but obviously pre-tax.
Total cost is £1050 * 0.6 (since I pay 40% tax) = £630.
The 25% final payment can't be made pre-tax. That's why early schemes tried so hard to minimise the final payment.
Well, rumour has it that HMRC will be setting a scheme up for their staff later this year, so I'll hopefully find out then!
The 25% final payment can't be made pre-tax. That's why early schemes tried so hard to minimise the final payment.
I hope that's not true - not what was explained to me. If that's the case I've got a big bill coming 🙁
I wish I was able to get it, i think its a great scheme
I hope that's not true - not what was explained to me. If that's the case I've got a big bill coming
I'm afraid it definitely is the case - see the PDF on http://www.dft.gov.uk/publications/cycle-to-work-scheme-guidance
"No tax relief is available to the employee for the purchase so, where the price is recovered from salary, it must be deducted from their net salary."
[i]The savings depend entirely on how your company run the scheme - there's no one right way to do it.[/i]
Exactly that. Little more than an interest-free loan for some, no real 'saving' per se.
I set up a scheme at my work but was advised by our accounts department that we would be better off betting a 0% deal from the LBS rather then pay through the C2W. Due to the fact that you don't pay tax when the money is deducted from your gross pay, this can have future implications for pension payments. It's these small details that these schemes try and keep quiet about just to get you to sign up.
In the end i got a 0% deal on a new bike and at least when i have finished paying for it then i own the bike. No final payment, no hassle.
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HMRC made it clear that the final transfer fee had to be a fair price for the bike
this is the bit that most people get wrong. HMRC said [i]nothing of the sort.[/i]
What HMRC clarified was the [b][i]residual value[/i][/b] of the bike. They want the tax on that amount. They really couldn't care less if your employer charges you that amount, gives it you free or even pays you to take it away from them, as long as HMRC get the tax on that residual value. If you get it free, it could just go on your p11D as a benefit in kind, for instance.
Sadly though most people make the mistake of saying "oh I have to charge that amount" or even "You know, even though I've already recovered the cost of the bike, I can make a tidy profit by charging that much".
HMRC made it clear that if the bike was transferred at less than market value, then the difference between what the employee paid and the market value was a taxable benefit. This is the same as anything else - your employer can't just give you stuff without it being taxed.
HMRC also provided a table of values which they would accept without further question as fair market value for bikes of a given age and original value. You can go lower than these values, but you may have to provide evidence of why a lower value is appropriate.