There are still some salary sacrifice schemes available today, which provide numerous benefits for employees and businesses around the country. One of the best options is the bike to work UK scheme. However, a lot of people are unsure regarding how the scheme works. Read on for more information.
Under the bike to work scheme, employees can save up to 42 per cent on the cost of a new bike, and businesses can also reap the rewards as a consequence. There are numerous benefits that business owners can gain, including improved attendance and productivity due to healthier and fitter staff. You will also save money, reduce parking, and boost your retention rates. Sounds good, right? But, how does the bike to work UK scheme actually work? We are going to take you through the process. The great news is that the cycle to work scheme is not complicated, unlike tax. With the cycle to work scheme, the employee essentially hires a bike through salary sacrifice. This is where the employee saves, as they will not need to pay National Insurance and income tax on the monthly salary deductions. Once the hire period is over, the employee can buy the bike from their employer or simply hand it back. This type of employee benefit scheme does not come from your net salary, but from your gross salary. The scheme has been hugely successful. It was introduced in 1999 by the government as a tax exemption to reduce environmental pollution and promote healthier journeys to work. Since then, hundreds of thousands of people have bought a bike on the scheme.
So, let’s walk you through the process entailed when it comes to bike to work schemes. Firstly, the employer needs to sign up to the scheme. If they have, the employee can choose a bike up to the value of £1,000, and the employer will purchase it or enter a finance arrangement. Over the 12 months, you will pay the money back through your salary. You are probably wondering how you can make savings under this scheme. Well, you will pay less National Insurance and income tax because payments are made from your gross salary instead of your net salary. Once the 12-month hire period is over, you will purchase the bike from your employer at the Fair Market Value, which will have been approved by HM Revenue & Customs. However, employers may offer alternative solutions to minimise the final cost of the bike for you, including simply paying the tax on the Fair Market Value, or extending the loan period.
Hopefully, you now have a better understanding regarding how the bike to work UK scheme works. This is a scheme that offers numerous benefits for both the employer and employee and, therefore, it is definitely something that you should consider if you are yet to.