What's Cycle2Work about?

Cycle2Work schemes are an amazing way to get hold of a new bicycle and cycling safety equipment. Savings are based on substantial tax breaks introduced by the government under section 244 of the Income Tax (Earnings and Pensions) Act 2003.

By signing up, you could use a brand new bicycle and cycling safety equipment and save up to 50% of the value of the equipment.

How much equipment am I entitled to?
Usually, your maximum allowance for loaned cycling equipment under this scheme is £1000. This cost is spread over the Hire Term, usually 12 or 18 months. The number of salary deductions you have during this period, will depend on how often you get paid. For example, monthly paid staff entering into an 18 month Hire Term will have 18 salary deductions. Full details can be found on the products page.

How Cycle2Work operates
Your employer will lend you, or effectively lease you, a brand new bicycle and cycling safety equipment for a defined period of time. In return, you agree to forgo a small amount of your gross salary at each pay period during the Hire Term, known as a salary sacrifice. This reduction covers the costs of hiring the equipment.

VAT savings
The cycling equipment is exempt from tax and National Insurance Contributions. If your employer is able to reclaim VAT and they are prepared to pass it back then this can save you even more money.

Lower finance rates
Using equipment in this way also means you're not paying the expensive finance rates often offered on the high street. It really is an excellent deal.

Things to note
It is important to understand the salary sacrifice is not a deduction from your salary but a reduction. Under the Cycle2Work regulations, if it were a deduction the equipment would be considered a benefit in kind by Her Majesty's Revenue and Customs and your tax benefits would be lost.

Similarly, in order to gain the tax savings, you cannot own the equipment during the hire period. Nor can you have an automatic or contractual right to own the equipment at the end of the hire period, so the agreement between you and your employer will be a hire agreement and not a hire purchase agreement.

However, your employer will have to dispose of the equipment at the end of the hire period and they may then elect to sell it to you for a fair market value.

Even though you won't legally own the equipment during the hire period, you can use the equipment mainly for cycling to work. You can also use the equipment for leisure purposes, providing that you understand that the main use of the bicycle is for cycling to work. You will not be expected to keep records of usage but it is expected about 50% of the use will be related to commuting to work. All these points are covered in the Hire Agreement.

Not as complex as it sounds
Although this sounds complicated, your employer has all the necessary approvals from the Office of Fair Trading. If you would like to benefit from Cycle2Work all you will have to do is select your Letter of Collection value on the Halfords Cycle2Work Web Portal, that corresponds to the total value of the bicycle and cycle safety equipment that you would like to use and sign the hire agreement with your employer. Some schemes will also enable you to pick a specific bike and cycling safety equipment - this will be clear when you log on to the Halfords Cycle2Work Portal

Cycle2Work regulations may seem complex, but, Halfords has made access to this scheme very simple.