Cycle2Work scheme

0scar

So after a few months of lurking I think it's time to join the forum. Hello!

A few months ago I bought a Scott Sub 30 hybrid. It does the job but I think I need a Focus Cayo 105 (note: need). I'm a student and I work in a bar 15 hours a week in term time and 50 hours in the holidays. I'm paid weekly so I pay no tax in term time (because my weekly earnings are under the threshold) but I am taxed for the other six months of the year, bringing me up to about £10,000 pa. My work don't have a C2W scheme but are happy to start one if I do the legwork for them.

Since it balances out to 40 hours a week over the year, will the Inland Revenue allow me to include the period when I'm untaxed in the term of the scheme? I've emailed them about it but haven't had a response. Has anyone had any experience of this?

Thanks!

Oscar

Underscore

Firstly, hi!

Secondly, you should be fine (though it may depend on the precise nature of the way you get paid by your employer...). The way the scheme works is that the payments to your employer for the hire of the bike are done by salary sacrifice. PAYE ultimately taxes you on your total income over the course of a financial year - regardless of the regularity of the income. So, you earn £10k, you should pay the tax due on that amount of income regardless of whether you earn it at a fixed weekly rate or in the less regular manner that you do. If you get a bike on the scheme, you sacrifice that off the top of your salary - so your salary becomes £(10k - x), where x is the cost of the bike. That way you save the tax that you would have paid on the £x. Also, you save the NI that you would have paid on the £x. Finally, if your employer is able to reclaim VAT, £x is the pre-VAT price.

So, the Focus is £990. If your employer can claim back VAT, you will sacrifice £860 (the pre-VAT price) of your salary on which you would have paid 11% NI (so £94.60) and 22% tax (so £189.20). Over the course of the year, you will have taken home £576.20 less. You will then have to pay a final payment. This cannot be agreed in advance but is often 5 or 10%. Assuming 10% (as the worst likely case), that's £101.05 (as this does include VAT and the VAT rate will be back to 17.5% by then). So, the bike will effectively have cost you £677.25 (less if you end up paying 5% rather than 10% at the end).

However, be aware that if you leave your employer, you lose the tax saving for any remaining payments.

HTH,

_

[Edited to add emphasis]