As businesses ask staff to return to the office in the wake of the pandemic, many are doing so with a renewed focus on the health and wellbeing of their employees. Here at Charnwood Accountants, one such initiative that we have made available to our team for a number of years, is the Cycle to Work Scheme.
HMRC do not allow employers to pass many tax-free benefits on to their workforce, however the cycle scheme is something that is well established and the government actively encourage companies to offer it to their staff. Not only that, it is now a better perk than ever, with no cap on the spend and the ability to use the scheme for cycling accessories as well as bikes.
Read on to find out more about the tax benefits of setting up a cycle scheme for your company, and if you would like to discuss it in more detail, feel free to get in touch on 01509 621833.
How does it work?
In a nutshell, employees choose a bike to hire from the company over a period of time, for example 12 months. The hire fee is then deducted from their gross salary each month.
By deducting from the employee’s gross salary rather than the net amount, they receive tax and national insurance savings which can equate to a saving of between 25% and 39%. At the end of the salary sacrifice period, employees can purchase the bike from the company for a low fee, determined by the market value of the bike.
The tax and NI saving, combined with the 12-month salary sacrifice option, has encouraged some of our employees here at Charnwood Accountants to purchase bikes that previously they would have deemed too much of a luxury to buy for themselves.
How easy is the scheme to manage?
The scheme is very easy to set up and maintain. Some high street retailers even run their own schemes which offer different benefits, including free service checks on bikes and additional vouchers to use against cycling equipment.
Do I have to choose which bikes employees can opt for?
Not at all – the process is very simple. You set a limit that the employees can spend, they then select the items that they want and request a voucher for the value of the bike that they have selected. As employers, you pay for the voucher through an online portal and then it is down to the employee to take that into a store or order online in exchange for their chosen bike. As soon as the voucher is paid for, you set up the salary sacrifice from the employee’s salary.
Since the scheme has been updated, many employers are choosing an upper limit higher than the previous £1,000 cap, which means the company benefits from bigger National Insurance Contribution savings. Not only that, staff are given more options, including more expensive electric bikes which may be necessary for those with longer commutes or lower fitness levels.
Other than financial, what other benefits are there?
1. Reduced staff sickness – recent research suggests that regular cycling halves the number of sick days. The average worker misses 4.5 days due to illness per year, whereas the average cyclist misses just 2.4 days a year. In addition, increased physical activity will also support employees’ mental health which in turn has been found to reduce sickness and absenteeism in the workplace.
2. Solves car parking issues – office politics regarding car parking can often be a big issue. More employees choosing to cycle allows the company to make the most of limited spaces available, with no parking costs for staff who choose to cycle.
3. Improved fitness and wellbeing – increasing physical activity levels can make staff more motivated and productive in the workplace. With employees arriving with higher brain function and a positive mental attitude, they are more likely to be ready to crack on (maybe after a quick freshen up!), without needing to resort to a cup of coffee to kick start the working day.
4. Reduced congestion – how often do you get stuck in traffic on your daily commute? With many cities now introducing cycle lanes onto the busy streets, you may find it quicker to reach your destination by bike rather than by car.
5. Peace of mind – as we emerge from the pandemic, many people remain concerned about exposure to Covid-19 and other illnesses on public transport. So, as well as offering benefits to mental and physical health, cycling is the ideal way to avoid catching a virus on the commute to work.
For more information about the cycle scheme and other ways you can make your business more tax efficient, please get in touch today.