Understanding Cycle to Work

‘Cycle to Work’ is the Irish government’s tax-efficient scheme to encourage people to ride to work.

The idea is that you can purchase a bike (plus bike equipment) up to the value of €1,000 through your employer, and you pay no tax.  If you’re a upper-rate tax payer, you’ll get the bike at less than half price!

The scheme works by deducting the value of the bike from your gross salary through a salary sacrifice, and the payments are often spread over a period of time – up to 12 months. Because the money is deducted before tax, upper-rate tax payer only pay 48% of the value of the bike from their net take-home pay.

For example, for each €1,000 that you earn at the upper-rate of tax (anything over €38,200 a year), you pay €410 in income tax, €40 in PRSI, and €70 in USC – a total of €520 – and you take home €480.  And so, by buying a bike through Cycle to Work, a €1,000 bike only costs you €480 out of your take home pay, which over 12 months is only €40 a month!

You can take advantage of the scheme only once every 5 years, even if you change employers. You are also expected to use the newly purchased bike to cycle to and from work. However there’s no requirement upon you or your employer to prove that you use the bike for commuting.

Each employer has slightly different arrangements for their staff, but many will use an external company to manage the scheme for them. Once signed up, it’s quite common that employees are issued with a voucher to redeem for their bike that is only accepted in certain bike shops. So it’s a good idea to check the details of your company’s policy before going shopping.

Although the bike is bought through your employer, it legally becomes your property straight away, and it’s your responsibility to maintain it, and to insure it.

And if your company is allowing you to spread your payments over time, and you leave the company before finishing those payments, you will be liable to pay the outstanding balance. You will also need to continue making payments if the bike is lost or stolen.

The Cycle to Work scheme has certainly contributed significantly to the surge in bike use over the last few years. Another impact is that cyclists are able to afford much better quality bikes, which helps improve their riding experience, and encourage them to ‘stick with it’. Unfortunately the increase in higher-value bikes on the roads has also attracted more theft – so you should always make sure to lock your bike properly.

Richard Bloomfield

Richard is the founder of Dublin Bike Blog. He commutes to work every day by bike, come rain or shine, on his Dutch city bike. You can read more from Richard on his blog richardbloomfield.ie.

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