UK’s Cycle to Work scheme hailed as a success

Tax break system is getting thousands of bums on bikes

4More than 400,000 people have used the UK's Cycle to Work scheme to hire and ultimately buy a new bike from their employer

The UK Government’s tax-break bicycle buying scheme has had wide ranging benefits, according to a new study. More than 400,000 people have now purchased bikes via Cycle to Work, and it’s proved a boon for health, the environment and bike shops.

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The Cycle to Work Alliance, made up of four providers of the scheme (Cyclescheme, Cycle Solutions, Evans and Halfords), asked their customers – both employers and employees – to fill in questionnaires about their experiences. In total, nearly 17 percent of all those participating in Cycle to Work took part.

Findngs in the resulting report include:

  • Employees participating in the scheme, on average, save up to 40 percent of the total cost of a new bike (though UK cyclists’ organisation CTC have pointed out that the average is more like 27 percent for standard rate taxpayers). 
  • Cycle to Work is the second most popular salary sacrifice employee benefit in the country, with 82 percent of employers who offer salary sacrifice schemes making it available to staff. 
  • Current users save around 133,500 tonnes of CO2 a year – the emissions of a small city.
  • The scheme particularly appeals to those who don’t cycle that much: 61 percent of respondents didn’t cycle to work before signing up to the scheme and 70 percent classed themselves as novice or occasional cyclists.
  • Cycle to Work has been a boon for bike shops: 76 percent of those surveyed said they wouldn’t have bought a bike if it hadn’t been for the savings available through the scheme.
  • Typical users are young to middle-aged men – 73 percent of participants are men and 65 percent are aged 25-45 – who have reduced their weekly car mileage by 15-20 miles.
  • A massive 87 percent of respondents noticed an improvement in health after starting to cycle to work.

The way the scheme works is that an employer buys a bike of their employee’s choice and then hires it to them for a set period (usually a year). At the end of this period, the worker can generally buy the bike for its (second-hand) market value.

Savings are made because the employer doesn’t have to pay VAT on the original purchase and the employee pays for the monthly hire via salary sacrifice, which lowers the amount of income tax and national insurance he/she has to pay.

There was speculation last year that HM Revenue & Custom’s revision of the ‘final market value’ of the bike would lead to a terminal decline in the scheme, but the report remains hugely positive about its impact.

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The scheme, launched in 2005, gets a ringing endorsement in the form of a foreword by Norman Baker, Liberal MP and Minister responsible for cycling. Looking to the future, he notes that a 50 percent increase in cycling would ‘unlock’ £1.3 billion of public funds that would otherwise have been spent on tackling congestion, pollution and health problems.