Cycle2work scheme...

Fresh60mmForks

How much will I save if I go into a 12 month contract on a bike that costs £439.99. It's so confusing, so many different views and answers.

I just want one simple answer. How much will I save? How much will I be paying per month?

Thanks

EKE_38BPM

I don't know the ins and outs, but doesn't what you pay/save depend on how much you earn and what tax bracket you are in?

I think that is why it is so confusing. I'm sure Sketchley will be along in a moment to put you straight, he's the C2W don.

notsoblue

Just see it as interest free credit, and you won't be disappointed.

richVSrich

not quite free credit.

i understand it as a hire lease scheme

the company owns the bike until your contract runs out, after which you have to pay X amount depending on how long the contract has been on for (ie the remaining value of the bike) (i think theyre saying 20% after one year - after paying monthly installments)

i've done it, it's nice to see it as "free credit" (of you close your eyes and wish hard enough...i wont be doing it again - not worth it in my mind, may as well just get free credit direct from the shop..

Fresh60mmForks

richVSrich wrote:

not quite free credit.

i understand it as a hire lease scheme

the company owns the bike until your contract runs out, after which you have to pay X amount depending on how long the contract has been on for (ie the remaining value of the bike) (i think theyre saying 20% after one year - after paying monthly installments)

i've done it, it's nice to see it as "free credit" (of you close your eyes and wish hard enough...i wont be doing it again - not worth it in my mind, may as well just get free credit direct from the shop..

How much are the monthly installment though, this is what I'm also confused about.

Firstly how much do I even get off? 30%?

If so do I pay monthly on the £439.99 or 439.99*0.70 (£307.99)

notsoblue

x = cost of bike
y = % tax you pay
z = length of hire period

(x*((100-y)/100))/z = Net monthly payment

?

bompington

439.99 / 12 = £36.66 per month from your gross salary
this means £36.66 less to pay tax & NI on, I think that's 26% in total for a basic rate taxpayer (someone correct me if I'm wrong)
This means the amount that comes out of your pay packet is £27.13 per month, so £325.59 in total.

After a year, you can buy the bike from your employer: HMRC say that should cost 25% of its original value, so £110

This would leave you with a discount of only £4.40, but if your employer is at all reasonable (i.e. not trying to get the most out of you for the bike), there are two options to reduce this:
1. Give you the bike as a benefit, this should then be taxed at 20% of £110, so £22 - an extra £88 saving
2. Extend your lease for at least another year for a nominal sum - I'm not sure you even have to pay anything - this means that the eventual value of the bike when you buy it off the employer is practically zero, but it isn't officially your bike for longer.

meanredspider

All too often, you'd be better off buying a discounted bike these days. The rules over residual value have taken a lot of the appeal out of the scheme and, really, it works out more as an interest-free loan (offset against the fact most suppliers won't discount bikes on the scheme).

I bought my MTB on the scheme (with about £300 of my own money thrown in to top up the £1k limit). I'm still "leasing" the bike (for free) from my employers to at least get some value from having done it so can't sell the bike.

If you have the cash, my suggestion would be to shop around for a good deal.

Fresh60mmForks

bompington wrote:

439.99 / 12 = £36.66 per month from your gross salary
this means £36.66 less to pay tax & NI on, I think that's 26% in total for a basic rate taxpayer (someone correct me if I'm wrong)
This means the amount that comes out of your pay packet is £27.13 per month, so £325.59 in total.

After a year, you can buy the bike from your employer: HMRC say that should cost 25% of its original value, so £110

This would leave you with a discount of only £4.40, but if your employer is at all reasonable (i.e. not trying to get the most out of you for the bike), there are two options to reduce this:
1. Give you the bike as a benefit, this should then be taxed at 20% of £110, so £22 - an extra £88 saving
2. Extend your lease for at least another year for a nominal sum - I'm not sure you even have to pay anything - this means that the eventual value of the bike when you buy it off the employer is practically zero, but it isn't officially your bike for longer.

So confusing. What does this chart mean to you, I don't get it!


http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm

Scroll down to " Valuation table " - I don't get what the percentages mean?

richVSrich

Fresh60mmForks wrote:

bompington wrote:

439.99 / 12 = £36.66 per month from your gross salary
this means £36.66 less to pay tax & NI on, I think that's 26% in total for a basic rate taxpayer (someone correct me if I'm wrong)
This means the amount that comes out of your pay packet is £27.13 per month, so £325.59 in total.

After a year, you can buy the bike from your employer: HMRC say that should cost 25% of its original value, so £110

This would leave you with a discount of only £4.40, but if your employer is at all reasonable (i.e. not trying to get the most out of you for the bike), there are two options to reduce this:
1. Give you the bike as a benefit, this should then be taxed at 20% of £110, so £22 - an extra £88 saving
2. Extend your lease for at least another year for a nominal sum - I'm not sure you even have to pay anything - this means that the eventual value of the bike when you buy it off the employer is practically zero, but it isn't officially your bike for longer.

So confusing. What does this chart mean to you, I don't get it!


http://www.hmrc.gov.uk/manuals/eimanual/eim21667a.htm

Scroll down to " Valuation table " - I don't get what the percentages mean?

under the table is a section called: How to tuse the valuation table.

iPete

notsoblue wrote:

Just see it as interest free credit, and you won't be disappointed.

This and if you are worried about the lease bit spend over £500 and get interest free credit instead.

rolf_f

Basically, it all hangs on the extended lease. If your employer will do it then it remains a great deal (if you are Public sector, as good a deal as it ever was pretty much).

If not, then look for bargains though you get much fewer options there potentially if you go for non big name bikes (none of the bikes I bought on the scheme are ever found discounted).

pdw

The only way to find out what it will cost you is to ask whoever operates your scheme - different schemes do it differently.

In some cases the gross monthly payments may be 1/12th of the bike, but there's no particular reason why they should be (in our scheme, they're less).

Some schemes will restrict your access to the best deals because they charge the retailer a fee. Others don't.

Our company's scheme allows you to buy from wherever you want, and you'll see a saving of between 35% and 43% depending on your tax bracket.

Topaxci

pdw wrote:

The only way to find out what it will cost you is to ask whoever operates your scheme - different schemes do it differently.

+1

I administer the scheme for an NHS organisation we do it in-house, with contracts over 18 months.
We'll let you buy from anywhere with no fees, so you can get good discounts. But don't do extended hire agreements.
Savings can be anywhere between 15-45% depending on your tax bracket, initial value of purchase and cost of any saftey gear (which has no residual value).

In general you should always save something on the scheme, however it is run. It is just a matter of whether that comes with restrictions that mean you could get a better bike or deal elsewhere.