The Bike to Work Scheme is a way for people in the UK to get a bike at a discounted rate through their employer. In a modern world where the car is king, people have started cycling to work in ever-increasing numbers.
Not sitting in queues of traffic and the cost savings compared to driving/parking has made this particularly appealing. In towns and cities, an added benefit is less pollution. Plus more people cycling also means less traffic.
There are even studies that show how cycling to work improves the health of employees. One study suggested that those who cycle to work take half the amount of sick days of other workers. It’s also something the NHS encourages so people are healthier, reducing stress on their services and helps people live longer. So there’s even more incentive for businesses to invest and encourage in the bike to work scheme.
Benefits of the Bike to Work Scheme
The Bike to Work Scheme works by giving you a voucher for a requested amount to spend at approved bike shops. The amount in the voucher is then repaid through your usual pay and shows up on your payslip from work. Because the Bike to Work Scheme deduction takes place before the tax calculation happens, you effectively have the tax taken off the amount you request. It’s similar to how a pension contribution or a charity donation also reduces the effective amount of tax taken off your wages. The amount of tax taken off varies depending on the tax rate you’re on.
So for many, the cost savings is a great benefit. For others, particularly those with bad credit, it’s one of the few ways to gain access to an ‘interest-free loan’ of sorts in order to buy a bike. Therefore it’s a great opportunity for everyone to get the bike they need.
It isn’t just bikes though! The amount on the voucher is to purchase clothing, component upgrades, wheels, power meters, anything! On one scheme I’ve used, you had to purchase a bike. But generally, on the more popular schemes, you don’t even have to buy a bike. You can use the bike to work voucher as a means to upgrade your existing bike and cycling wardrobe.
Technically speaking you don’t even have to buy a commuter bike. I’ve bought a time trial frame from Dolan previously on the bike to work scheme. Now there is a line in the T&Cs about committing to riding the bike you purchase for over 50% of your commutes. However, it’s borderline unenforceable unless you broadcast it around the office. Realistically, no-one will keep an eye on your Strava account and count off your rides. Obviously if asked, your TT bike just helps you get to work quickly. Even if you can’t fit panniers on it to carry your work laptop!
Disadvantages to the Bike to Work Scheme
It’s not all perfect however! Because of the tax-free benefit there’s some complicated wrangling in order to justify it. Whilst you pay back the cost of the voucher across 12 months, you technically won’t own the bike. It’s set up as a Hire Agreement between you and your employer, who are effectively the owners during this period.
You’re also responsible for the maintenance and upkeep of the bike. Most importantly the security too. You will have to continue making payments if your bike is stolen.
It’s also worth noting that one relatively new addition to the scheme is the requirement to make a one-off payment at the end of 12 months in order to take ownership of what you’ve bought. This payment offsets some of the tax benefits unfortunately.
Luckily it’s not too bad. After 12 months, for bikes over the value of £500, a fee of 25% of the voucher value * your tax rate (either 20% or 40%). So for a £500 voucher, the fee would be £25 and for a £1000 voucher, the fee would be £50 (based on a person earning under £40k a year and paying the 20% tax rate).
This figure changes over time. Often as a new hire agreement for 3 years after the original purchase. At this point, the 25% figure becomes 12%. This is to reflect the reduced market value of the bike. At this point that £500 bike will need a fee of just £12 paying and the £1000 bike will require £24 paying instead. Again this is based on a sub-£40k earner tax rate of 20%.
Other than these small things, there’s not too much else that’s a disadvantage really!
Where can I use my bike voucher?
Almost every reputable bike shop will take bike to work scheme vouchers. From good old Halfords to properly bike orientated shops like Evans Cycles and Cycle Surgery. Online dealers like Wiggle and Chain Reaction also take the vouchers. I personally have used a few at Dolan Cycles.
Most local independent bike shops will take them as well. In many ways this is one of the ways that these shops stay open for business. Purchasing a big ticket item like a brand new bike through this sort of shop helps keep them afloat. As an added bonus, these shops are often the best at servicing your bike. Perfect for when it needs a check-up or a fix.
The only retailer that springs to mind that does not accept them is PlanetX. I’m happy to be corrected though if this isn’t the case!
Conclusion
The bike to work scheme is a great way to get an interest-free loan of sorts to purchase a bike. There are extra cost savings too. And a good reason over just getting one of the direct loans from big bike shops. The tax savings are still worth the effort. Even with the further deduction after 12 months or more. It’s also a great way to get yourself a decent helmet and proper biking clothes. They are a godsend on those cold and/or wet mornings when riding to work!
