Bike to Work Scheme
Guidance Notes below - Any questions email info@newebikehub.com
Can I take part in the Bike2Work Scheme?
You may take part in the scheme if you are over 16 years of age, working, and receive your salary through the Pay As You Earn (PAYE).
Your employer must also have registered with us and your earnings should not drop below the National Living Wage (NLW) or National Minimum Wage (NMW) following the application of the salary sacrifice to your gross salary.
If your wages are close to the NLW or NMW then don't worry; your employer should be able to provide alternative ways in which to apply for the scheme whilst still benefiting from the reduced hire cost.
No credit check is required for you to take part, but if you are under the age of 18, you will require the signature of a guardian on your guarantor agreement.
If your employment is still in the probationary period you should be able to use the scheme, but please, always check with your employer if you have any uncertainties or concerns.
How are Bike2Work savings made?
Bike2Work Scheme allows for a 'salary sacrifice' employee benefit. This necessitates you agreeing to give up part of your salary in exchange for a benefit – in this case, a bike and/or relevant accessories.
This is deducted from your gross salary (before tax) meaning you will pay less Income Tax and National insurance. Effectively, the deduction will be taken before Tax and National insurance is calculated.
How does salary sacrifice create a saving?
By paying for the items directly from your gross salary (before tax) you’re able to achieve your savings.
This is because your income tax and national insurance is based on your salary minus the cost of the bike and accessories. This means your income tax and national insurance is calculated on the reduced amount of salary. As such, the amount of tax and national insurance you pay is reduced.
By utilising the salary sacrifice you will be able to lower the amount of income that you can be taxed on, and as such will be able to make a significant saving on the cost of your new items.
If you head to the Government's website you can check out an up-to-date overview of rates of tax. Normal rates of tax are 32% for a lower rate taxpayer and 42% for a higher rate taxpayer. This means that most scheme participants save between 32-42% on the cost of their bike and/or accessories during their initial hire period.
The total cost of your voucher will always show up as the gross (or RRP amount) rather than the net (or 'with-savings') amount on your payslip.
It’s worth remembering that at the end of the Hire Period, a transfer of ownership fee will be due for payment. This allows for ownership of the bike to be smoothly and effectively transferred to yourself whilst avoiding tax liability.