i know that this has probably already been discussed on the STW forum at some point but i’m thinking of getting a bike on this scheme so i can start commuting by bike again.
i’ve had a look at the scheme my workplace offers but i’m still struggling to fully understand how it works.

what my employer’s scheme seems to suggest is that if for example i buy a bike plus kit for say £700 then they will take 1/12th of that amount out of my monthly salary (about £58) for 12 months.
at the end of this 12 month lease period i will then have the option to continue with the agreement or return the bike as it becomes the property of cyclescheme…but i will have the option to buy the bike off them at an agreed fair market value.
now the bit i dont get is i pay £700 over 12 months for a bike and kit worth £700 and at the end of the year it doesnt belong to me…and i’d have to give it back or pay more to own it outright….

is this true or have i missed something glaringly obvious?

i should contact whoever is in charge of the scheme here at work to get a better explanation but i thought i’d first consult the STW collective for some advice…

The payments you make are pre-tax so you’ll save whatever your tax rate is (say 20%). Obviously, it’s even better if you are a higher-rate taxpayer.

It’s probably fair to say that you might get as good a deal by going in to your LBS and asking for a discount as the supplying shop has to pay the C2W operator a commision anyway. Depends whether or not you need/want to spread the cost over 12 months.

You are missing the fact that the 12 monthly payments are taken pre tax so you save whatever your current tax rate is.
At the end of the 12 months the best option IMO is to extend the agreement for another 3 years for a nominal one off sum (mine was £30 on a £1K bike) and pay nothing for the next 3 years and then you own the bike at the end.
As I pay a high rate of tax I saved around 35% on the price of the bike when all added up.
Some will argue you could probably negotiate that sort of deal on last years model bike at your LBS, but for me it was a 12 month interest free loan that saved 35% on the price of the bike,bit of a no brainer really.

so does that mean that i’ll save whatever tax i would have paid on that £58 out of my monthly salary?

My wife’s employer just did the 12 months. There was nothing else to pay, nothing to extend, she owned the bike. Now on the 2nd.

There are loads of different schemes but here is a calculator to explain the savings.

http://www.cyclescheme.co.uk/calculator

Yep. Assuming you are a basic rate taxpayer, you should save £140 on the cost of £700. The one-off payment you will have to make to obtain ownership at the end of the agreement will probably be in the region of £35 so you are looking at saving £100 or so altogether.

Oh and because its taken pre tax you also save on NI contributions on the amount paid.

so does that mean that i’ll save whatever tax i would have paid on that £58 out of my monthly salary

yes.

ahh!! i think i get it now!!
that bit wasnt very clear in my employers information…

Lots of information around the scheme is vague, because to a certain extent, employers can make choices for themselves, and in other areas, it’s best just to keep quiet – a good example being the usage – I ride my C2W bike to work every day, but this is only something like a quarter of my average weekly milage – but it’s 10 out of the 11 rides a week I do on average – so is my main use for it cycling to work (which it is if you count the number of trips I make) or is it not (which is the case if you do it solely on milage) I did ask this question as was effectively told not to ask to many questions…

I hope she has declared that on her tax return, as she’s due a substantial tax bill in that case.

Think of it as leasing the bike for a year with an option to buy it.

At the end of the year you can;

1. Buy the bike at market value (usually a fixed percentage of the original price)
2. Hand it back
3. Enter a new agreement with the scheme provider, make a one-off deposit payment (similar to one okf your previous payments but without the tax / NI saving) and after 3 years you will own the bike outright with no further payment due.

All of the above is spot on. But remember there are a couple of clauses which you need to consider.

If you leave your job or are made redundant you still have to continue to make the payments but without the pre-tax salary sacrifice.

The fair market value for HMRC purposes is this:

Some schemes or employers “may” choose to ignore this, some may abide by the letter of the tax law. If you take ownership of the bike and equipment after 12 months, on your £700 bike you would pay an additional £175 to transfer ownership.

The scheme when first introduced was a real money saver, now it’s OK for 12 months interest free credit, but with restricted choice of bike in some cases.

…and some schemes will allow you to continue the lease after 12 months (without further payment) so the bike (asset) depreciates over 60 months so you don’t pay the disposal fee above.

Crell.

All schemes are different. I’ve had varying info and quotes from different people administering the same scheme.

hope she has declared that on her tax return, as she’s due a substantial tax bill in that case.

The relevent tax year been and gone. No further payment required.

And even if it were not the case, quite how she would be due a ‘substantial’ tax bill on a £400 bike is beyond me…

All schemes are different

I know, that’s why I’m pointing out something you didn’t by beginning “…and some schemes”. 😛

I paid one months payment at the end to buy the bike. 12month old scott scale 960 for £76, I’m sure I’ve seen them on ebay for more that 😉

It also depends how your employer treats the bike at the end of the 12 months.

I get a £1k bike under Halfords C2W, but can choose from a number of approved retailers (I managed to persuade my LBS to sign up to the scheme so I could buy a Cube from him rather than Leisurelakes which was the other option I had)

I pay 40% tax, and so save that plus a bit of NI.

At the end of the year my employer gives me the bike. HMRC treat that as a taxable benefit, and make me pay tax on it. They value a £1K bike at £250 at 12 months old, so I have to pay 40% of that as a further one off payment (£100) The bike is then mine.

I also have the option of giving the bike back to my employer and walking away. Yeah right!

All in all I get a brand spanker for about £680 with 0% finance.

Just done this, collect my bike tomorrow, genesis day one disc, retail £699, my monthly is £36 so I’m saving £268 which is alright by me…

I’ve just finished my year of Cyclescheme.
The bit that confused me was what happened at the end of the year.
Turns out the best option is to go for the further 3 years on the scheme – you pay a “deposit” of £40 (bike was £900) and basically keep the bike without paying anymore.
The other options were -give it back or
-buy it off them. I considered this a rip off as I had already paid for the bike in 12 installments and now I have to give them £140 to own it?

So the ‘further 3 years’ option was taken and after 3 years its mine.
to be honest, I think its mine now! No-one is ever going to check if I keep it or sell it.
And the weird thing is I got an email to say I can get a new bike on the scheme!

Good deal really. saved 40% on a £900 bike, paid in installments and its now mine.