Bike To Work Scheme
The Bike to Work Scheme is a tax incentive scheme which aims to encourage employees to cycle to and from work. Under the scheme employers can pay for bicycles and bicycle equipment for their employees and the employee pays back through a salary sacrifice arrangement of up to 12 months. The employee is not liable for tax, PRSI, levies or the Universal Social Charge on their repayments.
The bike to work scheme applies to new bicycles and pedelecs (electrically assisted bicycles which require some effort from the cyclist). It does not cover motorbikes, scooters or mopeds.
Purchase of the following new safety equipment is also covered:
- Cycle helmets which conform to European standard EN 1078
- Bells and bulb horns
- Lights, including dynamo packs
- Mirrors and mudguards to ensure that the rider’s visibility is not impaired
- Cycle clips and dress guards
- Panniers, luggage carriers and straps to allow luggage to be safely carried
- Locks and chains to ensure cycle can be safely secured
- Pumps, puncture repair kits, cycle tool kits and tyre sealant to allow for minor repairs
- Reflective clothing along with white front reflectors and spoke reflectors
How do I pay for the bicycle?
Usually your employer pays the supplier for the bicycle. The employer then sets up a ‘salary sacrifice’ arrangement from your salary over an agreed time frame. This cannot be more than 12 months. This generally means that you visit the shop, select the equipment you wish to buy and have the shop invoice your employer directly for the cost.
You can only avail of the scheme once in a five-year period. This applies even if you do not purchase equipment up to the €1,000 limit.
Mary earns €40,000 per year which is subject to tax. Next year Mary will earn €40,000 but €1000 will be given to a bicycle shop before deductions only leaving €39,000 for the government to tax, i.e. giving the employee tax relief on €1000. Basically you are not going to let the government take any Income tax (41%) USC (5.3%) or PRSI (4%) from that €1000 that’s how you save, i.e. 50.3% (percentages will vary depending on earnings)
No need to claim it, inform Revenue or fill out any forms. The employer will simply take equal monthly payments to repay the €1000 advanced tax free sum from your own wages, however the government won’t see a cent of that €1000 to make deductions, it couldn’t be simpler. So Mary still earns €40,000 as last year but only €39,000 is seen by the government as the other €1000 has been taken out of the equation for that particular year & given to a bicycle shop. The employee can do this once in every 5 years under the bike to work scheme.
For more see citizens information.