Cyclists Tax Saving Tips

Suggestions to make the most of any potential tax savings related to cycling. These are 5 tips which will help to reduce your tax bill (as well as your waist line)

1. Rates and Allowances – Travel for Work

If you use your bike for work a tax free mileage rate can be paid by an employer to an employee for all business miles. Unfortunately that won’t include the mileage getting to work from home but 20p a mile soon mounts up (in both senses).
Below is a list of the current rates allowable. Even if your employer won’t pay that mileage rate and you travel qualifying miles you can claim 20p or the difference to make it up to 20p on your annual tax return.
Approved mileage rates

From 2005/06 First 10,000 business miles in the tax year Each business mile over 10,000 in the tax year
Motor cycles 24p 24p
Bicycles 20p 20p

hmrc link

You don’t need to pay national insurance or put it on a P11D either. link

2. Cycles

Employers can lend cycles or cycling safety equipment to employees to travel to and from work. Employees can also use them for leisure as long as the main use is for commuting. The employer can write the cost off against his tax.

Employers tax savings

3. VAT: Zero-rating of pedal cycle helmets

MRC Reference: BN CE37/01
Not the biggest deal this century but it may show it pays to lobby for what you want.
4. Tax free breakfast

EIM21664 – Particular benefits: exemption for bicycles and cyclists’ meals or refreshments
hrmc link

Section 244 ITEPA 2003, S.I.2002 No. 205 and S.I.2003 No. 1434

• If an employer lends or hires bicycles or cyclists safety equipment to employees the benefit of this is exempt from tax on employment income if the following conditions are satisfied:
• the bicycles or equipment are available generally to all employees of the employer (this does not mean that every employee has to be provided with a bicycle or equipment, just that the offer of bicycles or equipment is open to all employees if they wish to take it up) and
• · the employees must use the bicycle or equipment mainly for qualifying journeys. ‘Qualifying journeys’ means the same as for the works bus exemption (see EIM21850). Other use of the bicycle, for instance pleasure use or use by members of the employee’s family will not disqualify the exemption provided that the other use is not the main use of the bicycle.
• Employees are not expected to keep detailed records of time spent cycling or miles travelled for the purpose of this ‘main use’ test. Accept that the test is satisfied unless there is clear evidence to suggest that less than half of the use of the bicycle or equipment is on qualifying journeys. If it is clear that there is substantial use of the bicycle for qualifying journeys, do not make special enquiries about the extent of any other use.

The exemption also covers the provision of a voucher for hiring bicycles and equipment.

If ownership of the bicycle is transferred to an employee after a period of use as a benefit, the cost of the benefit is the market value at the date of transfer. This is different from the general rule when assets are transferred after a period of use as a benefit ( EIM21650).
Free meals and refreshments provided to cyclists on “cycle to work” days
Some employers designate a few days each year as “cycle to work” days. In order to encourage employees to participate the employer may provide a free meal or refreshments. Under general principles such meals are a taxable benefit in kind but regulations exempt them from tax, as long as they are provided on designated “cycle to work” days.

5. Tax Rebates

If you work for yourself or have a friendly employer check that you get your entitlement. If you have a genuine claim say for mileage then it may be possible to go back 6 years and get the tax Office to give you a rebate.