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Cycle to Work scheme is a UK Government tax exemption initiative introduced in the Finance Act 1999 to promote healthier journeys to work and to reduce environmental pollution. The scheme, which can save you between 16 and 40 percent off the cost of a bike, allows employees to benefit from a longterm loan of bikes and commuting equipment such as lights, locks and panniers completely tax-free.

How it works

According to the official Department for Transport info, the Cycle to Work scheme works thus: * Your employer signs up for the scheme * You then choose a bike from an approved supplier * The bike is then bought by your employer who reclaims the VAT * You then take delivery of the bike for your exclusive use – provided you use it for qualifying journeys, i.e. commuting to work * The VAT free price is then deducted from your salary by equal instalments over a period of time (typically 18 months), but as you don’t pay tax or NI on the income you forego, this will give you further savings. * After the period of salary sacrifice, the employer may give you the option to purchase the bike at a ‘fair market valuation’, though this depends on the period you have had the cycle loaned to you.

In short, employers benefit from fitter, more punctual, more wide-awake staff. Employees benefit from better health and better bikes because their money goes further. With a budget of, say £400, an employee in the high tax-band can, in theory, afford a bike, plus accessories, worth nearly £800.

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