It's a fair point. Right now the scheme is inaccessible to the low paid (presumably because deductions would reduce their income below minimum wage?). But they're the people that most need help in buying active/sustainable transport and bikes in particular.
In the meantime C2W operates as a big subsidy to middle class twonks like me buying expensive bikes income tax free. (To be fair, I bought a cargo bike that has 95% been used for commuting and not some carbon roadie nonsense).
It’s a fair point. Right now the scheme is inaccessible to the low paid (presumably because deductions would reduce their income below minimum wage?
Yes, it is that. It could be solved simply by removing that rule from the existing scheme and allowing people to use their own pay however they choose.
Something needs to be done but I can't help feel that the savings will just become a greater subsidiary to bike brands and bike shops.
I think limiting it to 1k for bikes and maybe 2k for ebikes would quell the vanity chariots for the middle class comments and perhaps limit the bikes to ones more akin to those you might actually ride to work on.
I think limiting it to 1k for bikes and maybe 2k for ebikes would quell the vanity chariots for the middle class comments and perhaps limit the bikes to ones more akin to those you might actually ride to work on.
Make top-up an offence of Fraud too perhaps.
Things might have changed but when I was working in bike shops the only folk making money out of it were the scheme providers. It certainly wasn't subsiding the small shops or distributors.
I don't think limiting it to commuter bikes is good, calling it cycletowork was a mistake IMO, it should be a tax incentive for a healthier lifestyle rather than just commuting. Taxing unhealthy and environmentally damaging activities, while giving tax relief for the opposite is good, whether that be cycling to work or riding in the forest on a Sunday morning.
I agree it does not work for shops, it does not work for those on lower pay, and something different needs to be created...
It certainly wasn’t subsiding the small shops or distributors.
If it brought customers to the new bike store rather than the classifieds or just keeping an existing bike for longer?
Admin fees and so on are taking a chunk out of the smaller shops and brands though.
limit the bikes to ones more akin to those you might actually ride to work on
which could really include any road or gravel bike, if your destination has suitable storage. Megatower might be a stretch to justify though...
A far simpler option is surely to remove VAT from bikes? Make it a 20% saving for everyone regardless of tax band.
The problem with this idea is there's almost no benefit to those on minimum wage. If you want to buy a bike then lots of shops offer 0%, klarna, V12, etc and if you don't pay tax then there's few or little taxes saving to be had, and if it pushed someone's income below the NI threshold they'd risk saving a few quid on a bike then having no state pension.
In the meantime C2W operates as a big subsidy to middle class twonks like me buying expensive bikes income tax free. (To be fair, I bought a cargo bike that has 95% been used for commuting and not some carbon roadie nonsense).
I think limiting it to 1k for bikes and maybe 2k for ebikes would quell the vanity chariots for the middle class comments and perhaps limit the bikes to ones more akin to those you might actually ride to work on.
To be fair I commute on some roadie nonsense (albeit not bought via C2W).
A far simpler option is surely to remove VAT from bikes? Make it a 20% saving for everyone regardless of tax band.
But once again offers bigger savings the more you spend, so the wealthier benefit more...
From the article:
Cycle to Work vouchers enable millions of people to receive discounts on new bikes and cycling equipment of 30-42%, with payments made through salary sacrifice.
Was wondering about this the other day.. would I be right in thinking that the saving goes up to 62% for anyone in the £100k to £125k bracket?
If it brought customers to the new bike store rather than the classifieds or just keeping an existing bike for longer?
Whereas if we're doing it for environmental reasons keeping an old one going or buying used is better than buy new.
I've not the maths Generalist so don't know the numbers but they will have the biggest savings as that's where the marginal tax rate is highest.
which could really include any road or gravel bike, if your destination has suitable storage. Megatower might be a stretch to justify though…
I mostly commute on a fairly fancy road bike, because it's the best tool for the job and makes the commute enjoyable and I can keep it in the storeroom next to the office. I sometimes commute on a Solaris or Orange Alpine 5 because it's only a short detour to add an EWS stage to the return journey. Not typical commuter bikes. (All bought used and not on C2W)
I never understood why it was not available to the low paid/minimum wage?, when I was working 6years ago I was paid £7.50 /hour and couldn't understand why those who worked higher up in the company with many multiple x my income could get a cheap bike yet they could very easily afford whatever they wanted.
can't remember exactly what ours is, but we are limited to 1k, halfords and tredz essentially, and i think it was worth something like a 50quid benefit to me, which after considering the restrictions, was of zero benefit. Literally only any good if i had no transport and needed something Asap on pay monthly, with bad credit history lol
But once again offers bigger savings the more you spend, so the wealthier benefit more…
Counterargument, the money that someone might save buying a carbon road bike (say £833 off a £5k bike) is probably smaller as a proportion of their income than someone on a lower wage getting £166 off a £1000 bike. And it's a far better solution than offering them £2100 off but the lower income buyer only between £0 and £210.
Do we complain that food at Waitrose and Jack Foultons both have the same (0%) VAT rate?
And do something for the self employed.
Just have the company buy it if it's for work purposes.
Commuting to normal place of work isn't a deductible business expense for the self-employed (or anyone else).
Commuting to normal place of work isn’t a deductible business expense for the self-employed (or anyone else).
But if you're self employed then your business address is presumably home, which would be where you do all your admin work, therefore could be considered your "normal" place of work? And you have to get from there to client offices, sites, whatever?
If your "normal place of work" is a clients office then you'd have IR35 issues?
Last time I did it through a scheme was about 15 years ago - and there was a £1k limit and I bought an 853 steel hardtail with fulll XT (good old Merlin).
My current employer's scheme is still capped at £1k, and that would just about cover the frame these days.
Not sure what my point is here, other than you get a LOT less bike for your £1k now. And I suspect many employers have retained that limit.
if you’re self employed then your business address is presumably home
Not necessarily. Maybe it's your butcher shop, bakery or candlestick production facility...
But if you're self employed and you work from home, you're not missing out much on a scheme that's supposed to be for buying bikes for commuting...!
Not sure what my point is here, other than you get a LOT less bike for your £1k now.
I think your point is that having a cap at any level might prevent people buying the bike that's most suitable for them... and I'd like to add that at the wrong level it could negatively effect UK manufacturing... [ Brompton do a sub £1K bike, but only just ]
Not necessarily. Maybe it’s your butcher shop, bakery or candlestick production facility…
But then you could always pay yourself an actual salary and then get a bike on cycle to work, you just might pay more tax overall.................
I never understood why it was not available to the low paid/minimum wage?
Because it’s tax relief and you can’t relieve something that isn’t paid in the first place.
Was wondering about this the other day.. would I be right in thinking that the saving goes up to 62% for anyone in the £100k to £125k bracket?
They get to pay (up to) 62% less tax on the amount they sacrifice, yes. But that should be looked at alongside the £27,432 to £42,432 in tax and £4010 to £4510 those people pay in Income Tax and National Insurance yearly.
I never understood why it was not available to the low paid/minimum wage?
Because it's illegal to pay someone less than minimum wage after salary sacrifices, and C2W is classed as a salary sacrifice, so if you're on minimum wage and then give up £50 a month of your pay for a bike then your employer has broken the law.
I think the main problem with C2W is it's been hijacked by the providers who have seen it as an easy way to make a few quid, there are multiple schemes out there now, all with their own restrictions, T&C's.
Not dissimilar to the PPI refunds thing where any number of sharks sprung up offering to help you do PPI refunds and then they'd take 40% of your refund. It wasn't difficult to go through the banks directly for it (and get 100% of your refund) but they pushed it and pushed it as "the easy / guaranteed option".
Most of these providers are linked into various HR outsourcing stuff - my last place had outsourced all the employee benefits to some "agency" that charged the employer a set fee per employee on the basis that they'd then handle all the admin and then the "perks" offered would be something like "save 2% at Center Parcs if you go on a Tuesday in November" and "save 1% at Boots when you spend £200 or more in one transaction". Worthless shite.
The cycle to work scheme that they administered was worse than useless.
Most of these providers are linked into various HR outsourcing stuff – my last place had outsourced all the employee benefits to some “agency” that charged the employer a set fee per employee on the basis that they’d then handle all the admin and then the “perks” offered would be something like “save 2% at Center Parcs if you go on a Tuesday in November” and “save 1% at Boots when you spend £200 or more in one transaction”. Worthless shite.
The cycle to work scheme that they administered was worse than useless.
Ours is similar, the Halfords scheme is apparently bundled in with a load of other useless stuff so we can't even discuss changing it, it's basically a corporate equivalent of Topcashback.
People on minimum wage pay tax!
I could be wrong, it happens often but.
The value of the bike is taken off pre tax. If you are on minimum wage and you take a s2w scheme you drop below the minimum wage.
It's not a question on whether you pay tax or not it's whether you drop below the minimum wage. Which THEN triggers whether you can sae the tax on a new bike.
Got to admit Ben, I'm not convinced about either of these statements:
Because it’s tax relief and you can’t relieve something that isn’t paid in the first place.
Minimum wage is way more than 20% tax threshold last time I looked.
They get to pay (up to) 62% less tax on the amount they sacrifice, yes
Err no. They pay 100% less tax, ie no tax, on the bit they sacrifice.
But that should be looked at alongside the £27,432 to £42,432 in tax and £4010 to £4510 those people pay in Income Tax and National Insurance yearly.
Why? Just because they earn shit loads shouldn't mean they get over twice the benefit others do..
I do love how this thread is already choc full of discussions on Tax savings and different rate brackets, and incentives for people earning over £100k, deftly missing the point.
I've said it before, C2W in it's various forms just doesn't benefit those who it should, and is just another salary sacrifice wheeze for the middle-upper classes. Reform is long overdue.
TBH I don't really care if Middle managers get to save a few hundred quid on a £10k weekend toy or not, so long as people on lower incomes are helped to access decent, affordable bikes (and despite what some of you seem to think you can still buy a decent bike for under £1k).
Joshvegas: Yes, you're correct (and saying the same thing as me).
I was pointing out that Ben was wrong with his reasoning for why those on minimum wage (or a bit above it) can't use C2W.
It's not because there's no tax to save (there is, people on minimum wage pay tax and NI). It's because employers aren't allowed to pay them less than minimum wage, and once you deduct £50 from someone who gets paid £20 more than minimum wage you're now paying then less than minimum wage and breaking the law.
It does irk me that as it stands quite a lot of the Cycle2work scheme amounts to a public subsidy of well-off peoples leisure equipment.
HOWEVER, if someone much cleverer than me can make it so that it's accessible to low income people and gets more folk on bikes then I mind a lot less if some dentist is also using it to fund their second gravel bike.
Whatever the scheme ends up looking like I hope they're able to shift the focus away from commuting. People need to travel around for shopping, socialising, childcare and a whole bunch of other reasons that are just as important as getting to work. Getting people onto bikes for these journeys* can really shift the dial on our active travel culture.
*I'm aware that there's a whole lot of other stuff that needs to happen alongside this, not least infrastrucutre
How about:
1. Minimum wage applies pre-sacrifice. You earn £11.42 per hour. If you want to pay £50/month for a bike through C2W you can. That's better for you than buying it from your post tax salary.
2. C2W increases your tax free allowance by the amount 'borrowed', rather than reducing your salary and so affecting the top rate of tax that you pay. So everyone saves bottom rate tax, even if you're an STW IT director on £500k.
It also needs to be something that is available to all not just those who work in companies that will do it.
I work for the government FFS and my employer won't do it. I would guess this is more likely if you are low paid too.
I like the idea of removing VAT from bikes but I remember when they did it with helmets. Suddenly got cheaper, then in a few months, it felt like they'd gone back up to the original price and a bit more.
I like the idea of removing VAT from bikes but I remember when they did it with helmets. Suddenly got cheaper, then in a few months, it felt like they’d gone back up to the original price and a bit more.
That's common practice, basically any tax cut (see for example the 5p/litre cut on fuel duty during Covid) rapidly just becomes extra profit for the retailer, the end price remains at/near the same for the consumer but the money is going elsewhere.
I like the idea of removing VAT from bikes but I remember when they did it with helmets. Suddenly got cheaper, then in a few months, it felt like they’d gone back up to the original price and a bit more.
It's a risk, but didn't that happen just before the Brexit referendum which crashed the £ by 20%?
Minimum wage is way more than 20% tax threshold last time I looked.
Depends how many hours you work.
1. Minimum wage applies pre-sacrifice. You earn £11.42 per hour. If you want to pay £50/month for a bike through C2W you can. That’s better for you than buying it from your post tax salary.
2. C2W increases your tax free allowance by the amount ‘borrowed’, rather than reducing your salary and so affecting the top rate of tax that you pay. So everyone saves bottom rate tax, even if you’re an STW IT director on £500k.
I like.
But I would go further and say anyone below the average wage gets a £100 voucher to spend at any bike shop annually. This can contribute to a new bike, servicing & parts, helmet or clothing.
It also needs to be something that is available to all not just those who work in companies that will do it.
I work for the government FFS and my employer won’t do it. I would guess this is more likely if you are low paid too.
Most government depts do seem to offer it - perhaps your union should lobby for it. There's probably a bike hater somewhere in senior management - the sort of person who will find 15 reasons why having a shower on site is going to result in the company getting sued! Actually if they really wanted to incentivise CTW they would make schemes available to companies for adding showers, bike storage etc.
At a previous employer we had a nasty CFO who hated cyclists and begrudgingly lost the battle with HR director to offer it - but with the shittiest possible implementation. When he left the new CFO happened to be a roady... and the scheme improved a lot, no limit etc! He could still be a c*n* but when someone raised the issue that the warehouse staff couldn't use the scheme because of the minimum wage rule*, he just went and bought 4 bikes on his company credit card and told them they could use them FOC, no need to repay at all... they weren't silly money but not BSO either - it was during covid (the issue arose because people didn't want to use public transport).
*they weren't even on minimum wage - but salary sacrifice on pension scheme put them low enough that a bike on top would be an issue.
At a previous employer we had a nasty CFO who hated cyclists and begrudgingly lost the battle with HR director to offer it – but with the shittiest possible implementation.
That's another issue with it - it's not just a barrier for the low-paid, it's a barrier in any employment where one senior figure can kill the whole thing dead cos they hate cyclists. Not dissimilar to how one stick-in-the-mud in a council department can effectively kill off any road safety schemes, cycle lanes etc.
The main overhaul needs to remove all the numerous providers from their position and have it administered by central government as a default. ANYONE can apply, no limit, no restrictions on shop or supplier, primary purpose should be riding to work but what you do with it in your own time is your business. Effectively create an interest-free loan scheme for bikes - it can be tied into repayments via tax / salary sacrifice if you work but other repayment options if you are on minimum wage. Could put in a graduated limit if required for people with low credit scores so someone on minimum wage can't go out and buy a £10,000 MTB but that's no different to most areas of life.
And then cross-subsidise for the low-paid, self-employed and even the WFH-ers - recognising that people who WFH may still need to go to meetings, still need to travel around their local area, shops etc.
I like.
But I would go further and say anyone below the average wage gets a £100 voucher to spend at any bike shop annually. This can contribute to a new bike, servicing & parts, helmet or clothing.
Risks reinforcing the whole "I pay more tax than you" anti-cyclist ranting?
That’s another issue with it – it’s not just a barrier for the low-paid, it’s a barrier in any employment where one senior figure can kill the whole thing dead cos they hate cyclists. Not dissimilar to how one stick-in-the-mud in a council department can effectively kill off any road safety schemes, cycle lanes etc.
The main overhaul needs to remove all the numerous providers from their position and have it administered by central government as a default. ANYONE can apply, no limit, no restrictions on shop or supplier, primary purpose should be riding to work but what you do with it in your own time is your business. Effectively create an interest-free loan scheme for bikes – it can be tied into repayments via tax / salary sacrifice if you work but other repayment options if you are on minimum wage. Could put in a graduated limit if required for people with low credit scores so someone on minimum wage can’t go out and buy a £10,000 MTB but that’s no different to most areas of life.
And then cross-subsidise for the low-paid, self-employed and even the WFH-ers – recognising that people who WFH may still need to go to meetings, still need to travel around their local area, shops etc.
That's why I think just getting rid of VAT on bikes would be a good idea.
Heck you could get rid of VAT on any sports kit if you wanted a more broad justification as it would* all pay back in NHS savings over the longer term.
No VAT on:
Gym memberships (gym must not have a sauna, steam room etc to qualify as a gym rather than "health club").
Badminton rackets
Football boots (clothing as usually is the odd one out, it's clearly an essential, but you can't adequately define between a £125 football shirt and a £5 gym top).
Bikes
etc.
*well spending in general on sport does, the question would be whether people would actually do more sport as a result, or just buy kit that was 20% better / pocket the difference.
But once again offers bigger savings the more you spend, so the wealthier benefit more…
That's the same logic that has people shopping by 'biggest discount'. The illusion of savings when you're actually spending more.
The problem with VAT exemptions is that they generally don’t lead to price reductions for consumers. Some good background here:
https://taxpolicy.org.uk/2023/07/12/vat_cuts/
I think I’d be more in favour of the bike voucher idea as long as it doesn’t juice demand so much as to cause localised inflation on bike stuff and become self defeating.
squirrelking
Free Member
But once again offers bigger savings the more you spend, so the wealthier benefit more…
That’s the same logic that has people shopping by ‘biggest discount’. The illusion of savings when you’re actually spending more.
No, it's different with tax.
With most discounts it's "save 20%" leading to "I'll save more if I spend more" but with tax it's "these people will save 20% and those people will save 40%"
Yeah I understand that bit, I think we're at cross purposes. I was referring to "the more you spend the more you save".
TBH I'd be as happy making it 20% across the board, keep VAT on bikes and a single use code on your tax code notification any retailer can redeem for the 20% rebate.
2. C2W increases your tax free allowance by the amount ‘borrowed’, rather than reducing your salary and so affecting the top rate of tax that you pay. So everyone saves bottom rate tax, even if you’re an STW IT director on £500k.
You may need to finesse that a bit, because as proposed it would actually affect your marginal rate because of the way the 0% band passes through into other bands.
But we can change it after I buy my “vanity chariot”, right? I’ve been hoping to buy one for, well, forever, but still can’t afford it.