New bikes are in truth pretty expensive and difficult to sneak past the finance police at home. Funding your next purchase can be a challenge. We at Trivelo obviously offer you a platform to sell your used bikes to help make this happen but that may not be enough to generate enough cash to buy your next bike. This is where the cycle to work scheme kicks in as an option for many working in large scale companies offering this as an employee benefit option for those with flexible benefits. This weeks blog is a step by step guide to help you explore this option with all the background information you might need. We’re hoping to give you plenty of time to consider this before your next annual benefits choice at work.
Its been around since 1999 and intended to help people buy bicycles for their commute by providing an interest free loan that is repaid income tax free. First thing to do is decide the size of loan you want to take out up to a limit of £1000. It may sound like a lot of money but once you start looking seriously at bikes you will realise it won’t go that far. Truth is the scheme needs to come up to speed and increase the limit in line with the ever improving world of bicycles. Having decided your loan amount you need to consider who will be the supplier of your trusty new steed. Previously the list of suppliers was seriously constrained limited to only Evans or Halfords which doesn’t permit you much choice or access to real bargains. The list is now vast and includes small scale retailers and principally on-line companies such as Planet X. Submitting your application you then wait for your voucher and upon receiving it take it to your chosen supplier and collect your new bicycle.
So how much is this going to sting you in the back pocket and why does this make sense? Classic answer….it depends. The cost to you depends on what rate of tax payer you are and how long you stay with your employer. Simplifying the numbers below as an example :
Cost of bike = £600
Monthly payments = £50 (before tax and national insurance)
Net salary cost per month = £34 (assuming lower rate tax payer)
Percentage savings = 32%
So you get a £600 voucher (loan) completely interest free and then you can repay it over 12 months with the money coming out of your salary automatically before tax and national insurance deducted. If your lucky enough to be a higher rate tax payer (lucky in the most painful sense of the word) then the savings could be even larger with you effectively saving nearer 50%. If you shop around in the January sales as well getting last years model for a cut down price you can make even more savings.
After its paid for
Your loan is repaid over a 12 month period which means after a year the bike is yours….kind of! The cycle to work scheme is effectively a hire agreement for the bike with the government amending the rules periodically on what this means. You effectively extend the hire period through signing up to an extension with a fee to transfer the ownership to you. The amount varies depending on the size of loan but is pretty nominal. The proviso of the arrangement is that you buy a bike for the commute to work so unicycles don’t fit the bill but you have pretty free reign on what you go for. Other than that the only downside is the complication of transferring ownership to you after the loan period which seems to change and require you to sign your life away occasionally extending the hire window. Overall though if you can use this scheme it could save you big time. Consider this – Buy a discounted bike using this and you could effectively buy a bike valued at £1500 for £500 impact to you with the payment spread over 12 months. Winning!
About the author – Billy is the founder of Trivelo Bikes and a big fan of the bike to work scheme having used it on numerous occasions to help fill his garage with his range of n+1 bikes.