CityCyclingEdinburgh Forum » Commuting

Cycle to work scheme - is it worth it?

(47 posts)
  • Started 10 years ago by KarenJS
  • Latest reply from deckard112

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12

  1. KarenJS
    Member

    I've heard a lot of good things about cycle to work and the savings it makes, but looking into it a bit more I'm wondering if it's actually worth it?

    The organisation buys the bike, you effectively pay it back over a certain time period, but at the end of that it's not yours. So if you want it, and the organisation is willing to sell it, then despite having paid it off you would end up paying an additional cost and may as well have paid the tax and bought outright in the first instance?

    Or the organisation lets you keep it but it's still not yours, and if you leave then technically you have to pay the balance but leave the bike.... Is this right or have I got the wrong end of the stick?

    Posted 10 years ago #

  2. SRD
    Moderator

    Sounds about right. There are other threads with extended discussion of these pros and cons.

    My work does cycle to work, but it also does a £1000 interest free loan that you pay back in instalments. I think I'd take the loan if I were buying a new bike.

    Posted 10 years ago #

  3. skotl
    Member

    The wonderful tax incentives, which amounted to up to 40% off, are effectively gone.

    Worse, as you say, it ends up being a benefit-in-kind at the end of the process so you are supposed to buy it off your employer at "market value".
    All in all *a* government (not sure whether current or last) took a fantastic idea that promoted healthy commuting, and concluded that it was a massive tax dodge and removed most of the points that made it appealing.

    All it is now is a 0% loan, which you would likely get from any retailer, anyway.

    That's my rant over; back to specific - yes, your employer buys and owns the bike (max all-in RRP £1,000) and rents it back to you over a one or two year period at 0%.
    At the end of the period, you buy it off them at market value. If your employer is up for the scheme then they will definitely sell it back to you, otherwise they are left with a whole bunch of two year old bikes.

    And if you leave and want the bike, then you also pay full market value at that point.

    Posted 10 years ago #

  4. gembo
    Member

    Bike to work is like a 40% reduction off any bike up to £1000, assuming that is the tax rate.

    Some schemes are better than others, the one city of Edinburgh council operate involves a five year period at the end where you lease the bike for nothing.

    Does assume you are not leaving. Not sure if they would track you down if you did leave in that five year period?

    Alternatively a bike in a sale with say 40% off and paid back over a year interest free would be the same.

    The bike to work scheme allows you to apply a sale price to any bike up to £1000 that is about it.

    Posted 10 years ago #

  5. Instography
    Member

    Most cycle to work schemes operate as a salary sacrifice. For a year, your gross salary is reduced by the cost of the bike. If your marginal tax rate is 25%, you'd get £1000 and repay £750.

    At the end of the loan period you have the option to keep using the bike, return it or buy it. The purchase price is governed by a table published by HMRC here. This suggests to me that after a year it would be worth 25% of it's purchase price so you'd pay £250. No benefit. It's only really worth doing if you plan to keep it until it's worth nothing.

    It's a much better deal for higher rate tax payers because you only pay back £600 from the original £1000.

    Posted 10 years ago #

  6. Baldcyclist
    Member

    Yes, and no.

    Saves up to 40% of rrp. I opted to extend the lease by 3 years, which means when I 'buy' it at that point it will be worth practically nothing.

    The problem I have is that after 2 years only the rear mech,handlebars and shifters are left of the original bike. The rest of it has been replaced as the old stuff wore out/broke. Not sure where I stand on handing back essentially a completely different bike, so I suppose I have to buy it as there is nothing left to hand back.

    Because of the rate I go through bits I probably wouldn't do Cyclescheme again. Although I did ponder whether handing back, and getting a new Cyclescheme bike every year would be more cost effective than continually buying bits. I never really came to a conclusion??

    Posted 10 years ago #

  7. gembo
    Member

    @skotl

    Lots of bikes sold through bike to work. Not sure how many went to people like me who were upgrading and therefore taking advantage of a tax break and how many went to people taking up cycling?

    Not sure if bike shops would argue that the scheme is good for them?

    Agree that after five years likely only to have frame as original. However the CEC scheme allows you to use the scheme again once you have made the payments but whilst you are in the period when you are waiting for the bike to be worth nothing,

    Posted 10 years ago #

  8. Greenroofer
    Member

    My employer makes us pay back the bike over three years, but keep it for five, so that at the end it's 'worthless' and we get it for nothing. If I want another bike sooner, I can have it, but have to pay the value of the bike. We have the Halfords scheme, which includes a discount.

    I'm paying £23 before tax each month for my £900 Brompton (£828 in total before tax).

    So, yes, there's a substantial discount but I'm not sure I'd go with it again because the Halfords scheme is a bit nerve-wracking if you want anything other than Boardman, Carrera or Pendleton.

    Posted 10 years ago #

  9. Instography
    Member

    I'm assuming that no one really bothers with the end point. I'd bet that no employers have any mechanism for taking bikes back. I'll find out if I do it again this year whether anyone comes looking for the pennies that the Croix de Fer should be worth by now.

    Posted 10 years ago #

  10. Dave
    Member

    It's more cunning than that, although if your employer rolls their own, you might get away with it.

    Both SWMBO and I have had scheme bikes in the past.

    Typically the scheme provider that your employer contracts out to (CycleScheme, Halfords, whoever) will buy the bike from the employer at the end of the hire period for a nominal sum (£1?) so once you've paid it all off (admittedly before tax), CycleScheme own your bike and your employer has an attractive lack of headaches.

    You then get a letter telling you that either you need to return the bike, pay them the full market value or pay a "nominal" fee (I think just under £200 for SWMBO's £1000 bike) to extend the hire for another couple of years, when you'll finally be able to buy it outright for a few quid.

    If you pay higher rate I think it's probably worth it, but otherwise, considering the £1000 CycleScheme voucher only has £900 purchasing power (it's literally worth £900 to the bike shop), I'm not sure it's any better than an interest-free loan, just with a lot more hassle.

    I keep meaning to look at the total SWMBO repaid because I have a sneaking suspicion it was more than £900 after tax, i.e. we actually overpaid for the voucher.

    Posted 10 years ago #

  11. gembo
    Member

    @dave - I was at a cycling Scotland awards day a few years back (i was the only one dressed for cycling) Anyway one of the focus groups was Dundee university bike to work person and she had received torrents of abuse because HMRC switched horses in midstream to a scheme like the one you / your partner are in.

    As stated other employers have swerved the HMRC rule change by the table of worthlessness mentioned in the link above.

    I am still switheirng about another one but am struggling to justify a folder just for tram. Noticed also my 5a.m. Start on first tram is next Saturday morning. I do sometimes wake very early but normally on work days.

    Posted 10 years ago #

  12. SRD
    Moderator

    @gembo get the folder, you won't regret it. flexibility will be worth it.

    Posted 10 years ago #

  13. gembo
    Member

    @SRD that is what I thought but remember I have to try it at biketrax but buy it at Evans. Makes me lukewarm then my work colleague who did buy a folder says better with real bike (his folder not a Brompton).

    Different
    Poor guy at work had a flat tyre last week so I had to lend him spanner and pump. Noticed he had swapped his holds worth with the flat for his folds worth (mezzo actually.). Alas it too had a flat.

    Posted 10 years ago #

  14. KarenJS
    Member

    Hmm, I'm on the lower rate of tax so doesn't seem like there's a lot of saving to be had. holding on to the bike for as long as possible, or getting a new one every time the period ends seem to be the most cost effective ways of doing it although also the most extreme!

    This is also further complicated by the fact that we are a very small charity and it's me who's going to have to set up the scheme in the first place!

    Posted 10 years ago #

  15. SRD
    Moderator

    karen, in that case, you might ask if they'd just do a straight loan, paid back out of your salary each month? easier for all, i would imagine. and there are precedents you can point to.

    Posted 10 years ago #

  16. KarenJS
    Member

    Thanks for the link Sara, does seem like it might be easier!

    Posted 10 years ago #

  17. KarenJS
    Member

    Although that doesn't have the potential saving from tax as it's taken from net salary. I'd be as well getting an interest free loan from a bike shop and not having the hassle of any of it!

    Posted 10 years ago #

  18. Dave
    Member

    The table of valuation is a bit odd really. I'd bite your hand off if you offered me a 12 month old £1k bike with average UK owner mileage for just £250!

    It's sad that they didn't just declare that the ownership of the bike was not a benefit in kind and have done with it. After all, the use of the bike (even though you're paying for it) *is* a taxable benefit, it's just that when they legislated the scheme originally, that benefit was specifically written out.

    Ultimately it's quite a regressive scheme so I'm not that fussed. If you earn £10k you don't save any tax at all, and you have to pay all the admin fees and hassle on top of the cost of your bike. It's not even available if you're on minimum wage and have to drive to work because public transport doesn't cater for your shifts (irony).

    On the other hand if you earn £150k+ you save over half the value and your accountant ensures that the question of ownership never arises...

    Posted 10 years ago #

  19. Instography
    Member

    It's like all salary sacrifices - hugely regressive. Childcare vouchers, additional leave, health care, dental plans, pensions, etc.

    Posted 10 years ago #

  20. Dave
    Member

    What would the People's Democratic Republic of Scotland do about bike to work, I wonder?

    Presumably it (along with all of the above) will be up for reconsideration in the new and improved Scotland 2.0

    Posted 10 years ago #

  21. SRD
    Moderator

    Sorry for being dense Insto, but why is it regressive? Do you mean regressive in the sense that it benefits higher tax payers more?

    Posted 10 years ago #

  22. cc
    Member

    @Dave What would be the best thing to do about bike to work? We could do that :-)

    Posted 10 years ago #

  23. PS
    Member

    The problem I have is that after 2 years only the rear mech,handlebars and shifters are left of the original bike

    What happened to the frame, @Baldcyclist? ;-) You could always hang onto the old worn out stuff and hand that back too. I doubt your employer would care...

    I've had two bikes through the scheme and it is a good deal for higher rate taxpayers (we have to pay the bullet payment after 3 years, so a higher rate taxpayer gets a £1k bike for a take-home pay reduction of £650 spread over 12 months then a bullet payment of £120 after 3 years - £770 spread over a fair period of time. Basic rate taxpayer would have a take-home pay reduction of £760 plus the £120 - £880 spread over time.)

    Like Dave says, it reduces your negotiating power with the shop, but for the majority of punters who are going to Halfords to get a £1k Boardman, that negotiating power is probably negligible anyway.

    Posted 10 years ago #

  24. Baldcyclist
    Member

    "What happened to the frame, @Baldcyclist? ;-)"

    It's broken too, and will be replaced this week. It's just another bit.

    "You could always hang onto the old worn out stuff and hand that back too. I doubt your employer would care."

    That's probably what I will do, as bits wear out put them back on original frame.

    I did think of doing a photo slide show of my changing bike over a year, but it's too far removed from the original bike to make any sense now.

    Posted 10 years ago #

  25. PS
    Member

    @Baldcyclist That is an impressive wear out rate!

    Because of the rate I go through bits I probably wouldn't do Cyclescheme again

    But presumably had you bought all this stuff out of your own pocket you would still have worn out the parts at the same rate? At least Cyclescheme will have allowed you to spread the (reduced) cost over time.

    Posted 10 years ago #

  26. jdanielp
    Member

    I had been assuming that a VAT saving is made as part of the scheme as well as the tax, but after a brief Google it would seem that that incentive was removed in 2012... If a bicycle is already reduced then it would presumably still be possible to make an extra saving though? It is just not that great for buying a bike at its full RRP...

    Posted 10 years ago #

  27. DaveC
    Member

    Here is my tuppence worth.

    Cotic >X< £1000 @ 40% saving = £600
    - I paid ~£75 per month before tax.

    After a year the drivetarin had worn out so off came the Sore mech, chainset, cassette and chain and on went the new triple chainset (£80) mech (£18) chain (£15) & cassette (£25). Total = ~£140.

    I chose the 3 year rental option over return or buy at ~£250. Cost me ~£70 I recall and after three years its mine.

    I've replaced the cassette and chain countless times (as I have three bikes and do them all ~twice a year). I also bought new tyres and mudguards as the OEM tyres were akin to wafer thin mints in the pucture department.

    Since then I've not chosen to buy through the scheme because I,
    a) don't want another bike under a £1000,
    b) want a bike over £1000
    c) buying out of scheme means I can buy at sale price and take the shop's own 10 month interest free credit.

    Now I have a decent number of frames & forks, I think I'll be just upgrading components as I go/wear them out.

    This might not be for you KarenJS but it worked for me. Depending on what bike and size you want there are some good deals to be had.

    Example.

    Spa Cycles has a £1500 RRP Dawes Super Galaxy selling at £980 curretly in 48 & 53 inch sizes only. Considering I bought a S/H Super Galaxy ~5 years old for £600 a few years ago, this appears to be a good deal. If you didn't have the cash, a zero percent credit card for 18 months would work out at just under £50 per month. Buying a full price* bike at £1000 would set you back ~£73 per month for a year.

    There are also others for as little as £450!

    http://www.spacycles.co.uk/offers.php

    * currently the cycle scheme only allows purchases of full price bikes.

    Posted 10 years ago #

  28. jdanielp
    Member

    * currently the cycle scheme only allows purchases of full price bikes.

    ah...

    Posted 10 years ago #

  29. Roibeard
    Member

    Part of the reason for the full price bikes, is that the scheme operators take 10% off the top (i.e. it's only worth a maximum of £900 to the bike shop).

    Given that they're already taking a 10% cut, they're not likely to discount further.

    Robert

    Posted 10 years ago #

  30. jdanielp
    Member

    Hmm, I'm beginning to regret not buying a new bike in the winter sales instead of waiting for Heriot-Watt's fabled cycle to work scheme (possibly coming in June).

    Posted 10 years ago #

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