Britain is not the only country offering tax-free incentives to buy a new bike, Cath Harris looks into how to get paid for cycling to work here in Britain and across the continent..
The Government’s botched attempt to raise National Insurance for the self-employed in last month’s budget handily ignored tax breaks that favour those with salaries.
Among those perks are tax-free bike initiatives such as savings of between 25 and 42 per cent on retail prices.
‘You choose a bike, hire it for an agreed length of time, then snap it up for a fraction of its original value,’ says the Cyclescheme website. ‘It’s like a year-round sale, with interest free credit.’
Any employer with a PAYE payroll qualifies.
Each year around 180,000 people join a bike to work scheme and in the last three years, more than 40,000 people have acquired bikes through Evans Cycles.
Bikes and accessories worth a total of £1,000 can be included. ‘The allowance is sufficient for a good quality, lightweight bike.
‘We also offer up to £60 worth of free gear and two free bike services worth £120, on top of the £1,000 total.’
A survey of participants in 2015 by the Cycle to Work Alliance, of which Evans Cycles is a member, found that the scheme had significantly boosted employee health and productivity.
It had also persuaded more people to ride; more than 60 per cent had previously been non-cyclists, novices or occasional cyclists.
Furthermore, a second study, last summer, by the Institute of Employment Studies found that the scheme was generating £72 million in economic benefits.
This ‘confirms that the cycle to work scheme is a vital mechanism in meeting the government’s objective of doubling cycling activity by 2025, said Steve Edgell, Chair of the Cycle to Work Alliance.
Initiatives such as this are by no means unique to Britain but each scheme differs. Here’s a summary of some of those on offer elsewhere.
More than 400,000 workers in Belgium are effectively paid to cycle to work. Employers fund a tax-free distance allowance, currently €0.23/km (20 p), which is tax deductible for the company. Its staff, in turn, can set bike costs against tax.
Firms can also provide employees with bikes. Their purchase is not taxed but for the company, 120% of costs are tax deductible. This also applies to cycling facilities such as bike parking and showers.
A scheme enabling firms to provide their employees with bikes (and electric bikes) was introduced in Germany in 2012. It gives employers the opportunity to offer a bike instead of a company car, with tax advantages.
The bike is paid for through salary sacrifice saving up to 40% on its retail price. Employers can set costs against tax.
The scheme is available to the self-employed who need only choose a bike from a scheme retailer, apply online and sign a contract.
No deposit is required and the monthly payment is regarded as a business expense. No distinction is made between business and private use.
Copenhagen topped last year’s bike-friendly-city ranking thanks in part to its bike-provision scheme. Work journeys by bike are included but business and private use must be separated. Home-to-work travel is only covered if the daily commuting distance is more than 24 km. Companies can deduct the cost of the bikes from taxable profits.
Austrian businesses can offer employees a company bike but, unlike the company car, it is not considered a taxable benefit. Firms can pay an allowance of €0.38/km (32 p) for business trips and can deduct bike costs from their taxable profits. Home-to-work journeys are included and there is no tax penalty for private use.
Self-employed workers can take advantage of tax allowances for business travel by bike, either by claiming a payment per kilometre or a depreciation cost.
The cycle-to-work scheme in France was launched in 2015 after a six month trial. It is restricted to a tax-free, voluntary distance allowance of €0.25/km and does not include bike purchases.
The trial involved 18 firms and 380 people who on average cycled 12 round trips per month. Their average commute was 3.5 km. Of those taking part, 19 per cent had switched from driving and one third increased their level of private cycling as a result of their involvement.
Republic of Ireland
The republic of Ireland’s Cycle to Work scheme is much like Britain’s. Employers pay for the bike and accessories and employees repay the cost tax-free, through salary sacrifice over 12 months. Self-employed people are excluded.
The scheme only applies if the company has paid for the bike rather than the worker paying and being reimbursed. There is no tax penalty for employees if firms opt not to pass on costs, up to a limit of €1,000 (£862). The scheme can be used again after five years.
Cath Harris is a freelance writer and proofreader specialising in cycling, environment and adventure travel. Read her work here.