Cycle to work scheme
Umbrella Company Benefits
You’ll have your own reasons for wanting to cycle to work, but there are probably more benefits than you realise. As well as personally benefitting from cycling from work, there are environmental benefits including less congestion and less pollution through lower emissions and reduced noise. The Department of Transport state that “At least 50% of the cycle’s use must be for ‘qualifying journeys’, i.e. commuting to
work purposes; “. So if you are working from home at the moment, or need to build up a level of fitness first its fine for the moment as you can more than make up for that over the coming years with more commuting as your fitness improves.
Getting started
If you read all our info, and just want to get things going, where do you start? Its easy.
First find a bike store that is registered with GCI.
Next, get the bike shop to provide a written quote to you with the purchase details (quote must be valid for 30 days).
Finally email us the quote, and we’ll help you with the next steps.
Our Cycle to Work scheme is a salary sacrifice arrangement which is approved by the HMRC to not incur any further PAYE or NIC charges.
How the scheme works
Getting your new bike through a salary sacrifice arrangement with No Worries Umbrella is simple. The main buying process is handled by the experts at Green Commute Initiative (GCI), who have produced this step-by-step guide for you. With GCI, we use their Instant GCI scheme.
The CGI Employee Instant Information Flyer.
Its important for you to understand that the Government’s Cycle to Work scheme is based on bicycle hire with no automatic right to ownership at the end of the hire period. You will not own the bike during the hire period. You will be hiring the bike from GCI and they will retain the ownership until agreed otherwise. CGI will write to you with ownership options at the end of the hire period, ensuring HMRC rules are adhered to. Unlike other scheme providers, they will not charge you a 7% end-of-scheme fee. We want you to make the maximum possible savings.
Step 1: Choose your new bike and any accessories you might need. We refer to this as the ‘bike package’. The package will obviously contain a bike but you can also include safety equipment, clothing, tools and spares. HMRC rules mean you are not allowed to include GPS or bike computers. Now contact one of our registered bike shops and ask for a quote for the package.
Step 2: Submit an application to GCI using their Instant GCI scheme. When submitting an Instant GCI application, a pro-forma invoice will be emailed to you. This is for a GCI voucher to cover the cost of the package. Please give us the pro-forma invoice so payment can be made. Without payment, your application will not be processed.
Step 3: You transfer funds from your personal bank account to our business account, equal to the total value of the bike package. These funds will be held in a separate bank account by us, and will be refunded back to you once the full value of the bike packages has been paid for though your salary sacrifice deductions.
Step 4: We then pay GCI from our bank account, and they arrange for your bike package to be purchased and ready for you to pick up.
Step 5: You agree a salary deduction from your normal payslips to repay the purchase value of the cycle. The most common scenario is to apply payslip deductions over the course of 12 months. Once complete, we will refund the original deposit to you in full.
A worked example
This example uses tax figures and rates for the 2024/25 tax year. Mia is a freelancer working with No Worries Red Umbrella and would like to buy a new bike, which she will use to commute from home to work. She is tired of the traffic and wants the extra exercise.
Bike and Accessories
Mia has found the bike she would like from a GCI-approved bike store, and its total value is £1,200. This includes lights, a helmet, and cycling clothing that helps keep her visible on the road.
Mia’s Employment and Salary
Mia works through a recruitment agency and is paid £22 per hour for 37.5 hours of work per week. After deductions for taxes and the Umbrella margin, Mia receives £588.48 each week into her personal bank account.
Salary Sacrifice for Bike Purchase
With the new cycle to work scheme, Mia has agreed to sacrifice £100 of her weekly income to repay the bike’s purchase cost. After 12 weeks, the bike will be completely paid off.
Weekly Payment Breakdown
In the first week of the scheme, Mia’s payslip shows a deduction of £100 for the cycle to work scheme. Her net pay is reduced to £525.49, a decrease of £62.99 per week in her net pay.
Completion of Payments
After 12 weeks of payslip processing, the bike has been fully repaid, and her payslips return to the normal amount.
Financial Summary
– Total Cost of Bike: £1,200
– Total Net Pay Reduction over 12 Weeks: £62.99 x 12 weeks = £755.88
Cost Savings Calculation
1. Total Out-of-Pocket Costs: £755.88
2. Initial Cost of Bike: £1,200
3. Savings: £1,200 – £755.88 = £444.12
Conclusion
Effectively, by using the No Worries Umbrella salary sacrifice arrangement, Mia has acquired a bike worth £1,200 for an out-of-pocket cost of £755.88. This results in a saving of £444.12, which equates to a 37% saving due entirely to the tax advantages provided by the salary sacrifice arrangement.
In summary, the Cycle to Work scheme not only gets Mia a new bike but also provides her with significant savings, making her commuting more affordable and environmentally friendly.
Have a question?
Come in and see us, or give us a call. We would love to discuss what you’re after and how we can help!