Cycle to Work… do the numbers really stack up?

I’m not convinced the number for cycle to work scheme’s really stack up that well.

example:
Currently have my eye on a bike that’s £2,499 (reduced from £3,500). As the bike is reduced from RRP the retailer wants to add 10% “admin fee” to process a Cycle to Work voucher. I currently overpay my pension contributions at work, this makes me a lower rate tax payer, meaning you qualify for the lower rate saving band (Cycle to Work advertise the savings as 25% to 39%). So assuming you qualify for the 25%, minus the extra 10% uplift, then you are saving 15% on £2750 = £412. Now minus the 10% admin charge and you are only getting the bike at £162 cheaper overall. Seems a huge faff to save £162 and comes with the risk that if you leave the employer before the 18months are up you would loose most of that saving…

Just does not really seem worth it to me… have I missed something obvious here?

Use a different retailer. I got £4k voucher through my work. Doing the math I pay back £2800 over 18 months.

No, I don’t think you have missed anything. Once you convert the % savings into absolute values it becomes clearer. However, it is worth checking the 10% fee as I bought my bike on Cyclescheme recently and the retailer was told they can longer charge the fee to the customer (although it had not been updated on the website). Overall, it ‘should’ be a ~30% saving at the other end, but once you get closer to £2k it feels like less value, and you might be better just using cashback or voucher codes.

Sorry the saving would be £412

I’m just about to finish paying back £600 odd for £900 odd worth of gears and brakes. Works for me.

I saved about £400 on a £1600 frame and fork and I’m not a higher rate tax payer.

The scheme was set up so it wasn’t to be used on sale bikes, RRP only. Obviously a lot of shops/buyers are happy to ignore that, their choice.

As breaking the scheme rules would be quite a serious thing when your employer is HMRC, as a lower rate tax payer I’d sooner find a bike on sale.

So assuming you qualify for the 25%, minus the extra 10% uplift, then you are saving 15% on £2750 = £412

Now minus the 10% admin charge

Explain that to me – you’re adding two 10% admin fees, or the same fee twice? I haven’t used C2W for a long time and don’t remember this (plus I paid full price anyway) – I assume there’s now a fee for doing the scheme, am I right?

Even then – what’s the ‘huge faff’? I did C2W once and I’d suggest it took me about 10 mins admin given i knew what i wanted and where to get it from. Send me the forms and I’ll do them for you and we’ll share the £162?

Where C2W falls down is that it was designed to buy bikes to enable people to C2W. Then they upped the limit way above inflation and people are now using it to buy exotic dandyhorses.  As a result the % admin charge, if that is what it is, is on a higher value and that I think is wrong. If it’s just the retailer passing costs on then the blame goes up to C2W but it takes literally no longer to write Colnago onto a form as it does Carrera so a flat admin fee should be payable, in line with what it actually costs to administer. And we fill the form out anyway!!

(currently annoyed by this on gig tickets – I set a £20 limit but there’s a band I really want to see but it’s £45 and they want £4.50 booking fee vs the £1.50-£2.00 I’m typically paying – and in any case I’m doing the booking!!! Grrr!!!)

The gross cost is 110% x 2500 so 2750. You get a 25% tax saving (25% x 2750) which is 687. After tax you pay 2750 – 687 which is 2063, a total saving of £437.

assuming you qualify for the 25%, minus the extra 10% uplift, then you are saving 15% on £2750 = £412.

You’re saving 25% on £2750, surely?

The other thing to check is whether you actually own the bike at the end or if it still belongs to your employer. Will they do the extension thing, if so, what will they charge? Or will they just forget about that bit as lots seem to.

It does not always stack up, particularly as a lower rate taxpayer.

We did it for mrs_oab – but our shop also worked with us and importer on an end of year model discounted. It saved a good chunk for us.

I though have not used it as I buy either second hand or discounted bikes, and have saved more than a cycle to work scheme.

I looked at it when thinking about a new bike and didn’t bother as could get sales bikes with a bigger saving and don’t need to worry whether they take the scheme my employer uses.  I can see they could work well for others though.

Seems a huge faff to save £162 and comes with the risk that if you leave the employer before the 18months are up you would loose most of that saving…

0% CC is less faff, you’ll own the bike, but you’ll pay the showroom price and don’t get to dodge any NI/tax.

Just does not really seem worth it to me… have I missed something obvious here?

Final fee or 3yr extension cost? (They still seem to keep this point vague) The bike isn’t actually ‘yours’ till you buy it from the company/scheme operator or they can write it off…

It is sort of ironic that it benefits higher rate tax payers quite a bit more than some poor soul who actually might not be able to afford to run a car and needs to use the scheme to spread the cost of a bike to actually ride to work!

Don’t forget the final purchase fee of 3-7% at the end of the lease.  For an expensive bike, it’s likely that it will be closer to 7% than 3 %.  Unless you have a scheme which completely writes it off over 6 years.  Most don’t.

Reduce your pension contributions so that your C2W is reduced by the higher tax amount and the savings will be greater!

The advantage for all is that you can buy a bike with no deposit and pay monthly with no interest fee.  Sure, the savings aren’t as great for lower rate TP, but it’s still advantageous due to the above.  Many might not have access to credit on such terms in the general marketplace.

Or buy a more expensive bike / one that isn’t on sale so they don’t charge a C2W admin fee

Unless you have a scheme which completely writes it off over 6 years. Most don’t.

Or an employer who’s HR & Payroll department is so utterly shite they forget… Ahem.

Which CTW scheme? I think some charge a small percentage at the end of the agreement to transfer ownership to you. Not a huge amount but tips the balance a bit further.

With your example, it is not as much of a saving as something not on sale but I’d still take a £450 saving and 12/18 months to pay it off versus no saving and paying up front.

it depends on the retailer.

My work uses the Halfords scheme, which can also be used at Tredz. Which opens up some more exotic choices.

With Tredz you cant use a discount code with C2W at the checkout, but you can buy discounted bikes or parts with C2W, with no additional fee or charge.

First time i did it, i purchased a Merida Espeedster bike for commuting (which i have used lots to… you know, commute). The bike was reduced from £2600 to £2350. Before they dispatched it they noticed a small chip on the fork and offered me £150 in vouchers as compensation. So i got a pretty sweet deal out of it all.

This year i bought a T-Type GX groupset via the scheme. That was also reduced from full RRP, so saved a few quid, plus the C2W saving. And as mentioned, its a 12 month at 0%. so a win win.

A friend used Pedal-On to buy a Giant, they were happy for him to pay the extra above his C2W voucher value. It was a discounted bike, but im not sure if he had to pay a ‘admin’ fee. I think they were just happy to shift the bike! 😀

They’re not allowed to add an admin fee anymore for cyclescheme.

I used the guys at https://www.e-bikeshop.co.uk/ for my C2W purchase, 2022 Orbea rise M10 reduced from 7500 to 5k, costs me 416 of my pre tax pounds. They were  the ones that told me that you’re not allowed to charge for cyclescheme admin fees any more.

The scheme was set up so it wasn’t to be used on sale bikes, RRP only. Obviously a lot of shops/buyers are happy to ignore that, their choice.

As breaking the scheme rules would be quite a serious thing when your employer is HMRC, as a lower rate tax payer I’d sooner find a bike on sale.

This is nonsense. HMRC say nothing about RRP or on sale bikes. The requirement for full price bikes is the cycle retailers’ response to the admin fee that they’re charged by the commercial middleman companies like Cyclescheme.

There’s no need to use a middleman company. I ran the scheme for my old employer in house, and it was a very good deal. As there was no middleman taking 10%, you could buy any bike you could find in the sales. I also set it up so that we passed on the saving on employer’s NI, so it was completely cash-neutral for the company.

It is sort of ironic that it benefits higher rate tax payers quite a bit more than some poor soul who actually might not be able to afford to run a car and needs to use the scheme to spread the cost of a bike to actually ride to work!

On the other hand, one of the reasons it was set up was to encourage people to cycle rather than drive – so having people who can and would afford to drive be able to take advantage of the scheme isn’t a bad thing.

The advantage for all is that you can buy a bike with no deposit and pay monthly with no interest fee.  Sure, the savings aren’t as great for lower rate TP, but it’s still advantageous due to the above.  Many might not have access to credit on such terms in the general marketplace.

No, it’s even worse than that.  It’s not available to all.  If you are on minimum wage you can’t access it as it would take your pay to below the minimum level, and many minimum wage workers work for organisations that won’t allow access to it as they can’t afford to pay for the bike up front – many small cafes and shops for example.

It’s a stupid scheme that offers the greatest benefit to those who need it the least and nothing to those who need it the most.

The advantage for all is that you can buy a bike with no deposit and pay monthly with no interest fee.  Sure, the savings aren’t as great for lower rate TP, but it’s still advantageous due to the above.  Many might not have access to credit on such terms in the general marketplace.

No, it’s even worse than that.  It’s not available to all.  If you are on minimum wage you can’t access it as it would take your pay to below the minimum level, and many minimum wage workers work for organisations that won’t allow access to it as they can’t afford to pay for the bike up front – many small cafes and shops for example.

It’s a stupid scheme that offers the greatest benefit to those who need it the least and nothing to those who need it the most.

They’re not allowed to add an admin fee anymore for cyclescheme.

Do you have a link to somewhere confirming this?

I’m not a higher rate taxpayer. And I’m pretty sure it also saved me NI? Think it might have been a 28% discount overall. And the spreading the payments over 12 months interest free was a good benefit too.

Regarding the admin fee – yeah it feels a bit naughty, but CycleScheme also charge the retailers a fee of 8.3% which might make sense on a RRP bike as there’s a decent margin, but if they’ve already cut their margins heavily on a bike, you can see why they wouldn’t want to lose nearly an extra 10%.  So I side with the shops here!

@Funkydunc – here’s the article about the banning of admin fees.  There was a bit of a hoohaa about it at the time.  https://road.cc/content/news/bike-shop-owners-fume-cycle-work-changes-305307

I’m not a higher rate taxpayer. And I’m pretty sure it also saved me NI?

Yes, it’s a salary sacrifice which saves you tax and NI at whatever rate you pay that, so it’s currently 30% for lower rate tax payers. However, if the employer uses a third party finance company to fund the scheme those costs will be passed on to employee, which may be what’s happening here to make the scheme look less attractive. (The OP mentioned 25% savings before admin costs.)

Having said all that, it feels a little like having your cake AND eating it when the complaint is that you get a significant discount off RRP, plus more discount, plus interest pay monthly payments. And nobody is forced to use a shop who charges for C2W, there are plenty of choices out there who don’t.

it feels a little like having your cake AND eating it

I agree.
We just had a very open conversation with the LBS about the exact costs / fees / profit for them to ensure we all felt happy that the deal worked out for all involved.

If you end up paying the 10% fee AND the 7% final fee, it’s often not worth it, especailly if you are not a higher rate tax payer.

Both those fees go straight to cyclescheme.
It’s a rip off IMO.

They probably make more percentage than the shop or manufacturer on the sale but appear to do very little.

The final value fee should really just be the tax on what the HRMC says it’s worth, so lower taxed earners pay less.

The final value fee should really just be the tax on what the HRMC says it’s worth, so lower taxed earners pay less.

Yep, but I suspect that a lot more hassle for employers because you now have to account for a taxable benefit. There’s no reason to double pay the 7%, though. When I ran our scheme, the “rental” payments recouped 93% of the value via salary sacrifice, and then the bike was transferred for 7% out of your post-tax pay.

So I side with the shops here!

Absolutely. A nasty move by Cyclescheme who unfortunately have become so dominant that retailers can’t afford to not deal with them.

It’s a stupid scheme that offers the greatest benefit to those who need it the least and nothing to those who need it the most

comes across slightly bitter I’m afraid..

it encourages more folks to cycle so clearly isn’t a stupid scheme. I totally agree the fact that min wage folks can’t benefit is one major flaw however,  but that doesn’t make the entire scheme redundant

@Funkydunc – here’s the article about the banning of admin fees.  There was a bit of a hoohaa about it at the time.  https://road.cc/content/news/bike-shop-owners-fume-cycle-work-changes-305307

Thanks just read – unfortunately our scheme is Vivup. I just assumed it was some central government cycle scheme thing but its not 🙁

I think its disgusting that there is not a flat fee that schemes charge. Say I look at an £10k ebike. Thats £1k in fees passed on. Why is an £10k bike any more different to administrate than a £500 bike that would cost £50 ??

As to OP, there are plenty of free calculators that allow you to see indicative costs for bikes at different values. I guess C2W is good if you know the bike will not be heavily discounted.

I am looking at an ebike at £8k. On C2W the total cost would be £5.2k which is a 35% saving and I could get the bike asap.

At the end of the season I might be able to get the bike with 20% off? Maybe a little more. But there is no guarantee.

However just looked at an Orbea Rise 2022 £9.6k rrp to a total cost of £4.4k a 54% saving which I dont think Ive ever seen that in sales

it encourages more folks to cycle so clearly isn’t a stupid scheme.

It’s a stupid implementation of a good idea. The “scheme” is actually just a tax break that says that letting employees use a bike for work and commuting is not a taxable benefit. But you can’t just buy a bike tax free, that’d be too simple. You can rent one, though, and then buy it once it’s sufficiently worthless. But in order to rent the bike to you the company would need a consumer credit licence, so they introduced a blanket credit licence exclusion for employers (which was what lead to the old £1k limit). The hire period had to be *hire* not hire purchase, which means that the company can’t formally guarantee that it will offer to sell you the bike at the end of the period, even though everyone knows that they will.

The upshot is you have this mad, contorted way to buy a bike that’s spawned an industry of middleman scheme companies that suck out a good chunk of the savings anyway.

Considering a £400 bike will reliably get you to work and back on a daily basis year round, I’m not really convinced.

But you can’t just buy a bike tax free, that’d be too simple.

This was the discussion I had with the LBS when we bought ours.

Can then just not zero rate VAT on bikes and bike parts?

comes across slightly bitter I’m afraid..

it encourages more folks to cycle so clearly isn’t a stupid scheme.

Sorry, but that is just bovex. The scheme is quite clearly flawed to the degree of being stupid. It’s totally unfair for multiple reasons.

And whoever he is is quite within his rights to sound bitter if he can’t get the benefit but others can.

I was actually going to post on here to ask if anyone actually, objectively thought the scheme was good and fair. But I didn’t as it so blatantly obviously isn’t.

So your response really does surprise me. I wouldn’t have believed it

There seems to be the belief in this thread that you cannot use a cycle to work scheme voucher against a discounted bike? When I bought my last bike on the cycle to work scheme, I took full advantage of the significant discounts and then applied my cycle to work scheme bike voucher on top of that….

Ironically, the bike I bought on the cycle to work scheme I don’t now tend to commute in on as I just bought myself a gravel bike and it’s much more fun for commuting and I’m faster than driving. Though I did discover this morning that a gravel bike on single track is actually not as fun

So as recommended I put the details in the Cycle Scheme calculator and it give an overall saving of 21% on the bike (£2,500). Assuming this does not factor in the 10% Rutland Cycles says it adds on to bike purchased using Cycle Scheme that are discounted, the overall saving is 11%, quite poor.