Travel to work by bike and the contractor cycle to work scheme

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Introduction 

As a contractor running your own company, are you considering whether you should travel to work by bike? Travelling to work by bike may be a good idea while contracting in future, especially in the more excellent weather. Going to work by bike may be viable if your daily journey isn’t significant. In this guide, we’ll look at some top cycle-to-work tips when you travel by bike to work. Moreover, we’ll research the contractor Cycle to Work Scheme (contractor) and see how this works. Besides the cycle scheme option for your business bicycle travel, we’ll research how your business can purchase a limited company contractor bike. We’ll also explore what to consider for ideas for cycle-to-work clothing and contractor bicycle storage. Furthermore, this guide will highlight what to consider around the contractor motorbike.

As a limited company contractor, you can look at bike travelling options if you travel to work by bike in future. First, you could use your private bike for business journeys and claim a cycle mileage allowance. However, when commuting by bike to work (UK), there’s a bike-to-work scheme (HMRC) for limited company contractors. Therefore, when you go to work by bike, HMRC has specific rules regarding their travel to work scheme. This guide will investigate the bike-to-work scheme rules and research cycle to work clothing. Moreover, we’ll research the option of claiming a bike or motorcycle mileage allowance when using your private bike for work. This guide has some top tips that show the tax implications of using a bike for work. Our guide on tax tips for contractors contains many other tax-saving ideas.

Initial thoughts 

First thoughts

In this guide, we’ll investigate travel to work by bike. We will also consider the government cycling to work scheme, bike tax and the type of clothing to wear. The government scheme has become more popular recently. Indeed, the Travel to Work Scheme (UK) for employees allows for other commuting methods, including bike travel. However, as a UK contractor, buying a company bicycle outright for your business is worth considering.

Do you care about the environment?

Do you care about the environment and want to reduce your carbon footprint? Another thought is, would you like to save money when travelling to work? If this fits you, what can you do about it? Well, you could use public transportation or, on the other hand, start the day by getting some exercise and travel to work by bike.

If you travel on busy roads, you might consider some cycle training ahead of this. You’ll become more proficient once you’ve undertaken the bike journey a few times. Therefore, when you arrive at the office, you’ll be ready to start your day and deal with whatever work lies ahead.

Other initial thoughts when you travel to work by bike

Can you claim bike mileage allowances?

You can claim mileage allowances for business journeys when you’re a business owner who runs a company. This includes when commuting to work by bike on either a bicycle or motorbike you own privately. When you travel by bike on business journeys, you can make a bike claim for your cycle mileage, and it’s treated as a business expense. As a result, your cycling mileage allowance will save your company Corporation Tax. However, please note any motorbike or bicycle allowance for mileage, just like car mileage, is subject to the 24-month rule. Therefore, only journeys that don’t fail the 24-month rule will attract cycle-to-work tax relief.

Buying a bike through a limited company

Alternatively, if your company plans to purchase a bike for work journeys for you, it can claim the cost of the business work bicycle or motorbike. As a result, it’ll receive a bicycle tax deduction (UK) on the cost of a bicycle or motorbike. What’s more, it can claim for any work bike running costs. However, both the cost of the bike and any bike expenses are subject to benefits in kind (BIK) if you use the bike for private journeys. Therefore, what should you consider regarding buying a bicycle for work for future cycle travel?

What to wear when cycling to work?

What should we consider regarding clothing when you travel to work by bike? When you go to work by bicycle, you’re the clothing you wear could be your everyday work clothes, as these should be fine for short journeys. If the weather is a bit cooler when biking to work, your cycle to work clothing could be a rain jacket, vest, and winter gloves. Therefore, when you commute by bike to work, please ensure you’re warm enough in cold weather.

Likewise, when riding a bike to work in warmer weather, you could wear your work clothes or even some lighter clothes. Professional cycling clothing consists of tight-fitting garments made of lycra, and you can change them when you get to work. Furthermore, if the weather is extreme winter, such as snow or ice, the answer regarding whether I should bike to work will probably be no. As a result, you can use your car or another method of transport.

Business bicycle storage

When you travel to work by bike, how should you store it when it’s not in use? There are various options available when you consider your contractor’s bicycle storage. These include bike storage solutions for any space. What’s more, durable, secure, and user-friendly racks and various stands, shelters, and enclosures are available. On the other hand, if you already have a space in your home or a shed, you could keep the bike there when you’re not using it. 

How to make claims for business mileage

What are the mileage rates when you go to work by bike?

Can you claim mileage for cycling, and if so, what rates can you claim when you travel to work by bike? Periodically, HM Revenue & Customs (HMRC) publishes the rates you can use to work out your cycle allowance for work journeys. There are different mileage rates for using a private bicycle or motorbike as there are for using a private car or van.

HMRC refers to motorbikes and bicycles’ mileage allowances as `MAR.’ You can claim a bike allowance for any business journeys as expenses from your company. The amounts HMRC sets when commuting by bike on business journeys are currently:

  • A motorbike mileage rate of 24p per business mile.
  • A bicycle mileage rate of 20p per business mile.

Unlike car mileage, there’s no lower HMRC cycling mileage rate after the first 10,000 miles when you travel to work by bike. The bike mileage rates above apply to the total business mileage you incur during the tax year. 

Keep your mileage logs when you travel to work by bike

As a UK contractor or small business owner, you should keep mileage logs for your business journeys if you use a business bike for work journeys. It is also best to keep mileage logs when you travel to work locations by private car. HMRC is more relaxed regarding bicycle mileage logs; however, you should keep these.

Furthermore, when you start to go to work by bike, please keep the mileage records for a private bicycle or motorbike separate from any personal car usage. These records should be kept separate because the mileage payable rates are different.

Please note when travelling to work by bike, you can regularly reimburse the value of any bike or motorbike mileage. Most contractors choose to do this every month.

If you reimburse more than the HMRC-approved rates, HMRC will tax you on the excess. Therefore, it’s vital to ensure you stay within the allowed rates.

Choose your bike & the government scheme before you travel to work by bike 

Let’s now examine the various options and their associated implications for your future ride to work by bike. 

Company bicycle 

There is a scheme called the Contractor Cycle to Work Scheme (HMRC). If you travel to work by bike under the scheme, as a director and contractor, you can benefit from using a company bicycle. Therefore, if you run your own contractor limited company, this bicycle scheme (UK) is something you could consider. Moreover, in some cases, the scheme is available for a company motorcycle.

There’s been quite a bit of hype by bicycle shops regarding the HMRC scheme. This bicycle scheme for employees enables workers who make a salary sacrifice to use a bike their employer provides tax-free. When the company purchases the bicycle, the employee pays this back as a deduction from their salary each month. What’s more, the employer can claim the VAT on the cost of the bike. Please see HMRC’s detailed cycle-to-work rules for further guidance.

A contractor with a company who decides to start travelling to work by bicycle could buy a business bike. The company would save Corporation Tax (CT) on the cost of the contractor bike. In addition, it can reclaim the VAT on this, too (see below).

Buy a bicycle through your limited company   

Can I claim a bicycle as a business expense? Suppose you’re a contractor who runs your own company, and you decide to start commuting by a business bike to work in the future. In this case, you may prefer to use a bike for your business journeys without the salary sacrifice option. The company can claim CT on the cost of the contractor’s bike. The company can reclaim the VAT if you buy your contractor bicycle from a VAT-registered supplier. Moreover, the contractor could buy the bike from the business later, at the market value, if the company finishes or stops using it for work journeys.

When the company buys the bicycle, you also benefit by purchasing it for the company out of pre-tax income. This method is better than paying for a bike personally because you’d pay for it from your post-tax income.

There are rules regarding the business and private use of a bicycle. Moreover, the taxman will look at cases where the contractor isn’t using the bike for business journeys. 

Lots of great choices when you travel to work by bike

When you consider purchasing a bike for contractor purposes, what’s the best bike for work travel? There are many choices for UK contractors if you decide to start to travel to work by bike. Indeed, this is in terms of the types of bikes that are available to buy on the market today. When you investigate the best bike to go to work in, you can research different types of bikes. These could include road, mountain, cargo, hybrid, and `normal’ bikes. Your local cycle store has all the details.

When a worker starts cycle commuting, travel to their work can include a permanent workplace. HMRC’s rules on what makes up a work journey are quite favourable when using the provision of tax-free bicycles. This is when we compare it to contractors’ usual travel rules.

As mentioned, plenty of choices are available if you purchase a bicycle for your company. While on the road, you can use hand signals when required. It’s important to remember that this helps other road users know which direction you’re going.

Bike lights help you see the road when it’s dark and help other road users, such as pedestrians, see you. Generally, you can use white front and rear red lights on your bike at night. However, the legal requirements regarding front and rear lights are a little more complicated, which you should read up on before using a bicycle on the road. 

Travel to work by bike on a company motorbike -purchase motorbike (UK) 

A bicycle journey to a contractor’s worksite might not be practical. In this case, some contractors who prefer to use two wheels and travel to work by bike may opt for extra power for longer journeys. As a result, they may choose the contractor motorcycle option instead. They may be able to run a company motorcycle tax-efficiently through their business. However, the motorbike for contractor option doesn’t benefit from the same tax savings as bicycles.

If a contractor’s business purchases a motorbike, there’s a bike tax in the form of a BIK charge. You base the motorbike tax BIK on 20% of the cost each tax year. It may be the case the company pays for the running costs (fuel, insurance, maintenance, road fund tax, etc.) for the motorbike. When this is so, there is an extra BIK charge of 20% of these annual costs. When you use the motorbike mainly for business journeys, this must be included in any BIK workings.

The Class 1A NI payable on any BIK is 13.8% in 2023/24 and 2024/25. The director or employee will also pay tax at their highest rate. The BIK is added to their PAYE tax code, which is applied to their salary to calculate Income Tax for each pay period. The director can choose to reimburse the company for the BIK elements. If they do this, the actual BIK reportable to HMRC will be reduced to zero.

Final thoughts 

If you care about the environment, you may travel to work by bike. When we consider biking and travelling, this method of commuting will help you get fitter if you start travelling to work by bike regularly. Indeed, cycling to work in the morning and on your ride home in the evening each day will improve your physique. Therefore, if you decide commuting by bike is the way to go, please ensure you wear appropriate cycling clothes so your journey is enjoyable.

As mentioned, you could buy the bike outright through your company or opt for the bicycle-to-work scheme. Alternatively, you could run a private bike and claim your business mileage. You may also decide you’d like a company motorbike to travel to work on. However, before your company buys this so you can travel to work by bike, it’d be best to weigh the tax costs first. Whichever type of bike you choose, there are tax considerations as set out above.

Link to Contractor Advice UK group on

LinkedIn    https://www.linkedin.com/groups/4660081/

Published On: April 6th, 2024 / Categories: Expenses /

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