This article was published in 1999, in Newsletter 23.
OK, so it’s 12p a mile, but no one’s going to get rich…
One of the less publicised aspects of Gordon Brown’s recent Budget was that it actually mentioned cycling. We think this is probably the first time this has happened.
The Budget contained a number of extremely tentative steps to support the Government’s Integrated Transport policy. The most widely discussed is, of course, the increased tax on petrol, and the media has clearly decided this is a Bad Thing. It was also no surprise.
A longstanding principle of the tax system is that the journey to work is a personal one, not part of someone’s business activities. This means that employers who pay for or subsidise some aspect of travel to or from work are making a payment in kind, an addition to salary, which is therefore liable to tax. The Treasury does not break this precedent lightly, though company cars have always had a hidden subsidy for those who can use them for personal journeys including to and from work.
The three tax changes directly related to bicycles are (from this April):
- If the employer provides a bike (or ‘cycling safety equipment’) for the journey to and from work, then it will not be liable for tax. It is not clear to me whether the employer would actually have to hand over a gleaming new bike, or whether money changing hands for the purpose would qualify. Company cars are often changed every two or three years, so taking this view with cycles suggests that taking part of your salary in the form of a good bike could save a higher-rate tax payer, say, £100 a year. Perhaps a more realistic figure for most people is £30 or so, though.
- A more generous allowance for using a bike for business travel (not travelling to and from work). Previously this has been set by individual agreements with the Inland Revenue, typically at a bit over 6p per mile, though a few employers have paid a much higher rate, comparable with a car allowance, without any tax being charged. The new rate is now specifically authorised at 12p per mile. If your employer pays less than this, you can claim tax relief on the rest. (If you don’t get expenses, that’s worth 2.76p per mile to a basic-rate taxpayer.)
- As well as the mileage allowance, people using their own bikes for business travel will be able to offset a proportion of the cost of the bike against tax. Since one of the biggest factors in the CTC’s estimate of the running cost of a bike – 14p/mile – is depreciation, it seems likely that these two allowances combined now exceed this. However, the amounts are never likely to be large. Unless your business involves being on the bike most of the time (like a courier, for example), it seems unlikely this would amount to more than a few pounds a week, and a few pence for most people.
Even though the amounts are not large, the principle has been established. When doing jury service recently, I was able to claim £6 for using my bike – enough to pay my Cycling Campaign membership!
The Budget also exempted workplace cycle parking from tax, in advance of the possible introduction of charges envisaged by the Integrated Transport White Paper. Realistically, workplace parking taxes on cars will be the really big change that will both promote alternatives and fund them. And this hasn’t yet been legislated for.
More generally in the Budget, employers can now provide bus services, either themselves or by a general subsidy to the operator, without making employees liable for tax, but they can’t directly subsidise fares for employees. Nor will back-up travel arrangements (such as employer-paid taxi fares) to cover for breakdowns in a car-sharing arrangement or occasional late-night journeys be liable for tax. Apparently season ticket loans are already exempt from tax.