The Cycle to Work scheme has had a default limit of £1,000 since it began 20 years ago. The reason for this isn’t the scheme itself, which doesn’t specify a maximum value, but rather consumer credit rules.
Cycle to Work is a tax-exempt loan scheme. Any employer offering it must be covered by a consumer credit licence authorised by the Financial Conduct Authority (FCA). Most employers don’t have a licence of their own. Instead, they use the Cycle to Work Group Credit Licence, issued for exactly this purpose by the Government. Its limit? You guessed it: £1,000.
In June this year, to coincide with Bike Week, the Government announced changes to its Cycle to Work guidance to ‘make it easier for employers to provide cycles and equipment, including e-bikes, worth over £1,000’.
In a nutshell: who is required to have FCA authorisation. Previously it had to be the employer, who depended on either the Cycle to Work Group Credit Licence or their own consumer credit licence. Now a third-party provider, such as Cyclescheme, can be FCA authorised and run the scheme for the employer. In this case, the £1,000 default limit won’t apply. Shiny new e-bike, here you come!
As well as being registered with a FCA-authorised provider such as Cyclescheme, your employer must decide to switch to the new version of the scheme; it’s not automatic. Some employers may stick with the scheme they’ve got, either because they’re happy with the £1,000 limit or because they have their own FCA authorisation. It’s worth noting, however, that some businesses with FCA authorisation could save money by switching schemes, as there’s a cost involved in a business having its own consumer credit licence.
Those Cyclescheme employers who do switch to the new version of the scheme are likely to do so by mid-August. Cyclescheme’s website will accordingly be upgraded to accommodate this, and from 15 August most employees will be able to request packages worth more than £1,000. You can check if your employer has switched schemes and changed the price limit by logging into the Cyclescheme website (click ‘I’m an employee’) and using the Cyclescheme calculator. Or just ask your employer.
The other aspects of how Cyclescheme works are fundamentally the same: you make an application; your employer approves it; you get an e-certificate to exchange for your bike; you make 12 monthly payments (equal to a twelfth of the bike’s tax-free cost); then you make a transfer of ownership payment (typically 7% of the bike’s RRP). So for a £2,000 e-bike, assuming you’re a standard rate taxpayer, you’d make 12 monthly payments of £133.33, then a transfer of ownership fee of £140. Total cost to you: £1,500, a saving of £500!
In principle, there’s no limit to the value of the bike and equipment you can get. In practice, you’re limited by your salary. You must receive at least the minimum wage after any salary sacrifice deductions. So you’d have to be earning around £134 per month more than the minimum wage to afford the £2k e-bike in our example. On top of this, employers can set a specific maximum value for Cycle to Work purchases, if they wish. If yours sets a price cap at, say, £3,000, that’s your limit.
Why would I need more than £1,000 anyway?
It’s true that you can get a decent bicycle and equipment for under £1,000 for most applications. But it’s easy to exceed that figure, particularly if you’re shopping for…
|A cyclist that rides every day come rain or shine can get 1 or more great bike(s) and all the high-quality gear they need.||E-bikes are changing the way we travel but they remain expensive, now obtain them at a fraction of their RRP.|
|Adapted and specialist cycles are often unique and created in low numbers meaning they were expensive.||Although you can certainly get a bike for less than a grand, basic Bromptons were at the limit.|
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