MegaSack DRAW - This year's winner is user - rgwb
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Does anyone know how the tax savings work for the cycle to work scheme? I understand the basics but I'm trying to figure out whether I should wait or not.
I currently pay 20% tax as my earnings are under 45k, but I'm due a pay rise soon and possibly a bonus later in the year, which may potentially put my earnings into the 40% range.
If I bought the cycle to work voucher now and paid it over 12 monthly instalments, would I only get the 20% tax savings even if my earnings went above the 40% threshold later? Or are the calculations made monthly? Or would I even have to wait until the end of the financial year before it's recalculated?
I appreciate it's a dull subject, so any help is appreciated!
If you are a regular employee taxed through PAYE then your cycle to work payments will be deducted from your salary before income tax is calculated. If your salary increases over the tax year this will be taken into account by the PAYE system and you will in effect receive tax relief at the highest rate you would have paid had the contributions not been deducted
Brilliant, thanks!
How does it work with bonuses or other one off payments? Say the annual salary is 43k and a 3k bonus, would there be any tax benefit then (except the 1 month when the bonus is paid)?
Look at your pay in the tax year April 6 to April 5 if you are in the higher rate band you will get the benefit at that rate - if you are on the cusp you are still getting the benefit at the higher rate because if it was taxed it would be taxed at the higher rate.