No levy Levo
What if we told you there was a way to get at least 32% off the price of your next bike? YT Decoy CF Pro Race e-bike for £4,080 rather than £6,000?
Or if e-bikes aren’t your thing, what about the Canyon Neuron Al 6 full sus trail bike for £985 instead of £1,450? You’d probably want those kinds of savings.
Well those discounts are available through that hallowed old Labour initiative, the Cycle to Work Scheme, following the news that the government’s green initiative isn’t just limited to £1,000 bikes. What’s more, e-bikes are available through the scheme too, so the premium you have to pay for a pedal-assist bike is pretty much wiped out.
Canyon and now YT Industries have both partnered with one of the scheme’s providers, Green Commute Initiative (GCI), giving you access to some of the best mountain bikes around — you don’t actually need to get a commuter bike to make this work.
Want the bad news? Well, you probably could have been getting these deals all along, because the £1,000 limit on the Cycle to Work scheme only ever applied to shops and employers not registered with the Financial Conduct Authority.
The grand scheme of things
The Cycle to Work scheme is a salary sacrifice system where your employer buys the bike for you, and you pay for it in instalments via PAYE. Cleverly then, you escape paying tax and National Insurance contributions on the value of the bike. This means the savings on your new bike could be up to 47%.
It’s a pretty complicated scheme, but it’s been around for 20 years now so well used and proven and reliable way of buying your bike. That initial loan from your employer usually lasts 12-24 months, then after that most scheme operators offer you an interest-free loan of five to six years until the bike is worth next to nothing in the eyes of HMRC. At this point you then buy the bike for a nominal fee — in the case of GCI it’s £1.
The scheme sounds so good, there must be a catch, right? Well yes, plenty of scheme operators are labouring under the mistaken belief that there’s a £1,000 limit. That’s the first snag. The second is that if you want to sell the bike after a year or two — like plenty of us do — you’ll have to give up some of those tax savings and pay the ‘fair market value’ as the HMRC puts it. That’s 25% of the cost if you sell after a year, dropping to 21% after 18 months, 17% at 24 months, 12% at 36 months and 7% at 48 months.
Your employer also has to sign up to a scheme in the first place too. Not such a problem for most companies, but what about if you’re self employed? If you’re self-employed, you can make use of the scheme if you’re set up in a way which means you’re technically employed by your own limited company. Alternatively, you can buy the bike and claim the VAT back via the business.
The scheme is only available for those over 18-years-old, and you can’t make use of it if doing so would make your gross pay drop below the minimum wage.