Is There Tax Deductible in the UK 2022

Is There Tax Deductible in the UK 2022

Fitness, pandemics, or the environment. Many of us have reevaluated our travel plans for 2021 and beyond for one reason or another. Sales of electric bikes have taken off in the UK as a result of this. Sales of e-bikes and e-scooters increased by 230% at Halfords in 2020.

You may wonder if e-bikes are tax deductible in UK and other Europe countries as e-bikes enjoy increasing popularity.Then you have come to the right place! This article will answer all the questions and it’s a good year to get involved.

Do Government support e-bike cycling

The answer is definitely yes! In July 2020, the government announced a £2bn investment in cycling and walking, known as Operation Gear Change. Although the Operation Gear Change failed to get fully implemented,Cycle to Work Scheme is one shortcut for you to choose.

What is the Cycle to Work Scheme

In 1999, the Cycle to Work Scheme was introduced as a tax-efficient incentive to encourage employees to use bikes for their daily commute. Over 1.6 million workers have gotten fit while commuting to work because of the scheme currently being implemented by over 40,000 employers.

Employers buy the bikes (recovering the VAT and receiving tax relief on the net capital cost in the process) and deduct the 'hire' charges from their employees' gross wages - a form of salary sacrifice. Also included in the package are safety equipment such as protective helmets. A win-win.

How do the tax reliefs work

As summarised above, there are tax benefits for both the employer and employee.

Employee tax savings:

Employees can 'pay' a monthly amount for the bike without putting their hands in their pockets since the payment can be deducted from their PAYE income. Consequently, employees save on income tax by making this payment for the bike. Therefore, each employee receives tax relief at their marginal income tax rate: 20%/40%/45%. In addition, the employee has less income subject to employees' NIC, saving tax at 12% or at 2% for higher rate payers.

Employer tax savings:

If registered for VAT, the employer can recover the VAT. The company can also claim capital allowances - so it can write off the cost of the bike against its taxable profits in the year of purchase (assuming it still has some of its annual investment allowance left).

Consequently, a £2,400 retail bike will have cost the company just £1,620 after deducting the £400 VAT and the £380 corporation tax relief from capital allowances (£2,000 * 100% AIA * 19% tax rate). Using PAYE, the employer can further save on Employer's NIC at 13.8% on the reduced net salary payments (after deducting the bike payment).

Who Can Apply

All employees (in UK) who want to purchase an e-bike with the employer’s consent and:
  • 16 years of age or above
  • Earn at least minimum wage after the salary sacrifice for the e-bike has been deducted from the pay
  • Paid and taxed via PAYE (Pay as You Earn) system

Can you buy 2 bikes on the cycle to work scheme

How many bikes can I get? Sure! There is no problem with getting two bikes as long as they are both safe and suitable for you to ride, and your total does not exceed your scheme's maximum.

Can I buy a second hand bike on cycle to work scheme

Sadly, no. It's a good scheme since it's your bike and you're riding it to work (generating a tax break) - you can't get a bike for someone else. As long as both are used for commuting, you will be able to get more than one bike on the scheme.

Does the cycle to work scheme cost the employer anything

For an employer, is there any cost associated with the scheme? Establishing and running the scheme are both free. Employee leases bike/equipment from employer through salary sacrifice until employer recovers full amount.

How do I claim for Cycle to Work scheme

Complete an online application at www.cycle2work.info. Your employer code is required. In the event that your employer approves your application, you will receive your letter of collection by email - you use this to claim your bike and accessories.

Can you buy childrens bikes on cycle to work scheme

Sure. In 2019, the government relaxed the rules so that vouchers can be used to purchase frames, components, clothing, and accessories. Car racks, turbo trainers, cameras, GPS and children’s bikes are not available through any Cycle to Work schemes.

How often can you get a bike on the cycle to work scheme

You may use the scheme once every four years as an employee. The four-year span between tax breaks is based on the tax year. In January 2021, you would be able to buy a new bike regardless of when you bought it in 2017.

How much money will I save on buying the bike

Obviously, it depends on your tax bracket as well as the value of the bike and accessories. You'll save tax and National Insurance over the term of the Cycle to Work agreement because your bike monthly payment reduces your gross salary. For a basic rate taxpayer, that will be 32 percent of the purchase price.

What happens at the end of the Cycle to Work agreement

Technically, you’ve hired your bike from the scheme for the length of your agreement and you’ve got a few options at the end of it:
  • Enter into a new agreement, paying a small deposit to rehire the bike
  • Buy the bike from the scheme
  • Give the bike back

In most cases, a new agreement will extend your bike use for up to four or five years, depending on the scheme you sign up to. In order to purchase the bike at the end of the term, you need to make a one-off payment to the scheme provider under HMRC rules. There is a sliding scale for this, based on how long you've been using the bike and its initial value.

Below is a table of the minimum value that HMRC places on used bikes of different ages:

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