The Bike to Work Scheme allows employees to purchase a new bike and safety equipment tax-free through their employer. The scheme promotes healthier commutes and benefits both employers and employees. This guide explains how the scheme works, who is eligible and how to get started.
Key Points
- Employees can purchase new bikes and safety equipment tax-free through an employer arrangement, which benefits both employers and employees.
- Participants pay income tax only on their reduced salary after the cost of the bike and equipment is deducted through salary sacrifice, resulting in big tax savings. Depending on your tax rate, you can save up to 52% on bike costs due to tax exemptions and reduced USC and PRSI.
- The scheme is open to employees in the civil service and private sector, and all types of bicycles and essential safety equipment.
What is the Scheme?
The Bike to Work Scheme allows employees to purchase bicycles and safety equipment tax-free through a salary sacrifice arrangement. By giving up part of their salary, employees can pay for a new bike and equipment over a period of time.
Employers purchase the bike and safety gear directly from suppliers, ensuring the process complies with tax regulations. This way it promotes environmentally friendly commuting while providing tax savings for both employers and employees.
Business owners should check if they are eligible, especially if they pay themselves through PAYE, and if the scheme is available in their organisation to get the most out of this government initiative.
How do Business Owners Save with the Scheme?
One of the biggest benefits of the Bike to Work Scheme is the savings:
- Employees save on tax by purchasing bicycles and safety equipment through salary sacrifice payments.
- The cost is deducted from your gross salary before tax, PRSI and USC, resulting in savings of 28% to 42%, depending on your tax rate.
- Overall, you can save up to 52% by combining income tax exemptions with reduced USC and PRSI contributions.
- Business owners also save on National Insurance (PRSI) and other payroll costs through salary sacrifice deductions.
- Employees can claim tax relief every 4 years, starting from the tax year the bike was purchased.
Eligibility for Business Owners
The scheme is open to civil or public servants and private sector employees. Self-employed individuals can also participate if they pay themselves as directors through a business account. For employers, it’s voluntary, but if they do participate, it must be offered to all employees fairly and transparently. Business owners should check with their HR department to see if the scheme is available and what the requirements are. To join, employees must sign an agreement stating that the new bicycle and safety equipment will be used for personal commuting on qualifying journeys to and from work, in line with revenue guidelines. This way, everyone benefits from the work scheme while following the rules to promote healthier, eco-friendly travel.
Types of Bicycles
The Cycle to Work Scheme covers all types of bicycles available at cycle shops, for different needs and preferences. Eligible purchases include:
- New bicycles
- Electric bikes
- Cargo bikes
- E-cargo bikes
So every employee can find a bike for their commute, whether they prefer a traditional bike, an electric bike for longer distances or a cargo bike to carry heavy loads.
But second-hand bicycles, motorbikes, scooters and e-scooters are not eligible for the work scheme. This way, all purchases meet specific standards and are reliable and safe for daily commuting.
After purchasing through the work scheme, employees are responsible for their own bicycles.
Essential Safety Equipment
Safety is top priority in the Cycle to Work Scheme, which includes essential safety equipment for a safe and enjoyable ride. Eligible items include:
- Cycle helmets
- Bells
- Lights, including dynamo packs
- Bulb horns
- Mirrors
- Puncture repair kits
- Tyre sealant and reflective clothing
- Cycle tool kits
- Chains and pumps
- Panniers, luggage carriers and strap locks
- Dress guards and mudguards
- Cycle clips
Note that child seats and certain accessories are not covered.
All safety equipment must meet strict standards to ensure rider safety and enhance the cycling experience
Step-by-Step Guide to Joining the Scheme
Joining the Cycle to Work Scheme is easy but requires specific steps to get the most out of it. First, check with your employer if they participate, as it’s voluntary. The work scheme covers qualifying journeys between home and your regular workplace.
Employees can use the scheme once every 4 years, counted from the tax year of the bike purchase. Participation involves paperwork, including an agreement to repay the cost of the new bike and equipment over time through deductions from your salary to formalise the process.
The following sections detail each step.
Check Employer Participation
Check if your company participates in the Cycle to Work Scheme. Ask your employer or check with the HR department if the scheme is available and what the requirements are. Since employer participation is voluntary, this step ensures you are eligible.
Knowing your employer’s involvement and the specific requirements helps you navigate the process smoothly and meet all the criteria.
Choose Your Bicycle and Safety Equipment
Choosing the right bicycle and safety equipment is a key part of the process. You can buy from any vendor or your preferred bike shop.
Once you’ve chosen your bicycle and safety equipment, inform your employer to proceed with the necessary arrangements. This ensures your purchase is approved and compliant with the scheme guidelines.
Complete Payment Agreement
Participating in the scheme requires a payment agreement which involves:
- Signing an agreement with your employer
- Stating that the new bicycle and safety equipment will be used for personal commuting on qualifying journeys to and from work, in line with revenue guidelines
- Allowing deductions from your salary for the bike costs over an agreed period
Once approved, payments commence, and the bike cost is covered through pre-tax gross salary deductions. This formalises your participation and ensures all financial aspects are managed correctly.
Repayment Period: Understanding Your Repayment Schedule
The Cycle to Work Scheme allows you to repay the cost of your bicycle and safety equipment over a period of up to 12 months, with payments deducted directly from your salary. This salary sacrifice reduces your income tax, PRSI and USC, making quality bikes and gear more affordable.
You can choose a shorter repayment period if you prefer. Note repayments start from the employer’s purchase date, not when you first start using the bike.
Make sure to review your repayment schedule with your employer so you can budget effectively and get the most from the scheme.
Participant Responsibilities: Getting the Most out of the Bike to Work Scheme
Participants must use their bicycle and safety equipment primarily for commuting or work-related journeys to qualify for tax benefits. You are responsible for your own bicycle.
- Maintaining your bicycle
- Keeping all purchase and repayment records
- Notifying your employer if your employment status changes or if you stop using the bike for work travel
By understanding and following these responsibilities, you will get the full health, financial and environmental benefits of the Cycle to Work Scheme.
Scheme Administration: How the Scheme is Run and Monitored
Good administration by employers is key to the scheme running smoothly. Employers must register with the Revenue Commissioners, purchase bicycles and safety equipment on behalf of employees and deduct repayments from gross salaries through a salary sacrifice arrangement. These deductions reduce employees’ Income Tax, PRSI and USC liabilities.
Employers must also keep accurate records of all purchases and repayments and ensure full compliance with the scheme rules and guidelines. For support or clarification, employers can contact the Revenue Commissioners or seek advice from professional advisers.
Proper administration ensures employees can get the most out of the scheme while meeting all legal and financial obligations.
Health and Environment
Cycling to work improves your health by increasing cardiovascular fitness, building muscle and supporting mental well-being through stress reduction and mood elevation. It’s a great way to stay fit and feel good every day.
Environmentally cycling reduces car use, lowers carbon emissions and improves urban air quality. By choosing to cycle, you reduce your carbon footprint and contribute to a cleaner, healthier planet.
As a zero-emission transport option, cycling supports sustainable living and helps protect the environment for future generations.
Issues
While the Bike to Work Scheme offers many benefits, it’s important to be prepared for potential issues:
- Employment termination: If your employment ends before you finish repaying the bike, any outstanding balance will be deducted from your final salary to ensure all payments are completed.
- Theft:
- Inform your employer immediately and provide details such as the date of theft and the crime reference number.
- Some schemes offer an initial 14 days of free insurance cover; after that, you should insure your bike yourself.
- If the bike is stolen and not replaced, any outstanding payments must be deducted from your net salary.
Being aware of these scenarios helps you manage your responsibilities and avoid surprises.
Notes for Company Owners Using the Scheme
Company owners should note the following for smooth participation and maximum savings:
- Eligibility: Company owners paying themselves through PAYE and PRSI can participate; sole traders without a company structure generally cannot.
- Tax Relief Timing: The scheme can be used once every 4 years. Keep track of the year you acquired your bike to know when you can next claim relief.
- Approved Equipment: Only new bicycles and related safety equipment are covered. Second-hand bikes, child seats and some accessories are excluded. Purchase from a qualified cycle shop to ensure compliance.
- Salary Sacrifice: Costs for bikes and safety equipment are deducted from gross salary before tax, PRSI and USC, resulting in big savings. Ensure this is formalised with a written agreement.
- Repayment and Ownership: Repayments usually last up to 12 months, but ownership transfers to the employee once they receive the bike. Keep records of all transactions.
- Insurance and Maintenance: Owners are responsible for insuring and maintaining their bikes.
Tips to Get the Most out of the scheme
- Plan Ahead: Buy bikes at the start of the tax year to get maximum tax relief.
- Choose Wisely: Pick bikes and safety gear suitable for your commute, including electric or cargo bikes and essentials like cycle helmets, bells, lights, mudguards, cycle clips, and puncture repair kits.
- Understand Salary Sacrifice: Discuss how salary sacrifice affects your gross and net pay.
- Keep Records: Keep agreements, receipts and payment records for easy administration.
- Insure and Maintain: Insure and service your bike.
- Promote: Encourage others in your organisation to join, promote health, sustainability and savings.
By following these steps, company owners and employees can maximise tax savings and enjoy the scheme’s health and environmental benefits.
Summary
The scheme is a great programme that delivers big savings, health benefits and environmental gains. Employees can buy bicycles and safety equipment tax-free, save money and live a healthier, more sustainable life.
Promote the scheme in your organisation, and not only will employees benefit from well-being, but also reduce carbon emissions and promote eco-friendly commuting. Get on board to create a greener, healthier future for your business and its people.
FAQs
Who can join the scheme?
Civil or public servants, private sector employees and self-employed individuals who pay themselves from a business account as directors can join the scheme.
What types of bicycles are included?
New bicycles, e-bikes, and cargo bikes are included. Second-hand bicycles and motorised vehicles like scooters and e-scooters are not.
What safety equipment is included?
Cycle helmets, lights, puncture repair kits, cycle tool kits, pannier bags, bells, mirrors, bulb horn lights and luggage carriers are included. Prioritise these for maximum safety.
How can company owners save?
Company owners can save through tax exemptions and USC and PRSI. By deducting costs from gross pay, they reduce their liabilities. If your employment ends before you finish paying for the bike, the outstanding balance will be deducted from your final gross pay. If the bike is stolen, any outstanding payments will be deducted from your net pay.
Can sole traders join?
Sole traders can’t generally join unless they pay themselves as directors from a business account and contribute to PRSI. So only company owners who pay themselves as directors can benefit from the tax savings and bike tax-free purchase.
Can I use the scheme for work-related journeys other than commuting?
The Cycle to Work Scheme covers qualifying journeys, including commuting and other work-related trips like visiting clients or travelling between sites, as long as they meet the scheme guidelines. Check with your employer and sign any required agreements.