If your New Year’s resolution was to start cycling to work but you still haven’t got round to it, a reminder of the tax breaks available may yet galvanise you into action, says Steve Lodge in the FT.
Under the Government’s ‘Cycle to Work’ scheme, as long as at least 50% of your bike use is for work, your employer can buy you a bike and reclaim the VAT. The VAT-free price is then deducted from your gross salary in 12 or more instalments. This means that higher-rate taxpayers save 41% in tax and National Insurance deductions, while basic-rate taxpayers save 33%.
Once the repayments are complete, you are then entitled to buy the bike outright at a ’fair market price’ – that is, around 10% of the original cost. Schemes are usually run via local bike shops and accessories such as locks and helmets can be bought under the same terms.
At present, about one in seven firms offers their staff ‘flexible benefits’ include cycle purchase, but only one in 20 take advantage of it. Most people simply aren’t aware that the scheme exists.