Advanced options
The scheme is salary sacrifice: your employer buys the bike, you repay from GROSS pay over (usually) 12 months, saving income tax + NI on the whole amount. The end-of-term ownership fee is tiny if the scheme runs the HMRC-blessed extended-use agreement (most do): check yours does. Caveats: you need an employer that runs a scheme, sacrifice can't take you below minimum wage, and leaving the job mid-term means paying the balance from NET pay.
What The Cycle To Work Calculator Works Out
- Tax + NI saved: the bike and kit price multiplied by your combined income tax and National Insurance rate. The employer buys the bike and you repay from gross salary, so the sacrificed pay never meets tax or NI: 32% for a basic-rate taxpayer (20% tax plus 8% NI), 42% higher rate, 47% additional rate.
- Effective bike cost: the price minus the tax saved, and the monthly deduction over the term. A GBP 1,000 bike costs a basic-rate taxpayer about GBP 680 and a higher-rate one GBP 580.
- The small print: e-bikes qualify and most schemes no longer cap the price at GBP 1,000, so a GBP 2,000 to GBP 3,000 e-bike attracts a four-figure saving. Sacrifice cannot take you below minimum wage, and leaving mid-term means paying the balance from net pay.
- Custom tax + NI rate (advanced): type your own combined rate, for example for Scottish income tax bands (the intermediate rate makes 29%), or where part of the sacrifice straddles two bands.
- Term (advanced): most schemes run 12 months, some 18 or 24; a longer term shrinks the monthly deduction without changing the saving.
- End-of-scheme ownership fee (advanced): technically the bike is hired, and HMRC's valuation table would price a one-year-old bike over GBP 500 at 25% of its cost. Schemes avoid this with an extended-use agreement, where the fee falls to about 3% to 7% or to nothing; enter yours to see the true saving.
- Gross pay sacrificed per month (advanced): the payslip line (price divided by term) against the smaller drop in take-home pay. Salary sacrifice can slightly reduce pensionable pay and statutory pay calculations.
- Commute costs saved and payback (advanced): the weekly fuel, parking, congestion charge or fares the bike replaces, multiplied by the weeks you cycle, and the months until that saving has repaid the bike's effective cost. Regular commuters usually clear it within a year or two.