Thursday, 16 February 2012

Tax Incentives for Cyclists

The UK has the Cycle to Work Scheme which I have used twice now to purchase bikes, keeping about £900 out of the grasping hands of the tax man and in my pocket. However as with so many things velo related our near neighbours have taken it a step further, the Netherlands and Belgium in particular give tax relief on cycling to work

Bicycles - The employer is allowed to provide a tax free payment for commuting by bike of again €0.18/km (23 US cents). Employers are also allowed to provide employees with a new bike, but only once every three years. The value of this bicycle is treated as income, but if ite is used for commuting, the value of the bike is fixed at €68 ($US89) for tax purposes. This applies to bikes up to a maximum value of €749 ($US976). Employers may also providebike accessories (e.g. maintenance, clothing locks etc.), this is tax free up to a value of €250 ($US326).
 Tax treatment of employer commuting support: an international review

In Belgium, companies and public organisations are likewise allowed to pay their employees when cycling to work with an amount of 0.20 € per kilometre per day (no more than 15 kilometres a day). The supplement is tax free for the employees and the employers get tax credit for the expense.
Tax incentives for bike commuting

Commuting distances
We can see on table 7 that 20% of commutes are under 2 miles and 46% are under 5 miles. Of those 12% of car commutes are under 2 miles and 40% of car commutes are under 5 miles.
Commuting and business travel factsheet tables – April 2011 (XLS – 211 KB)

Table 11 says average occupancy is 1.2, so many people could change modes without affecting travel partners.

We'll go for a middle ground of 3 miles because it is roughly the length of my commute. Cycling 3 miles is achievable for most people I reckon. 5 miles is perfectly doable by many. At these sort of distances people are probably travelling on 20/30/40mph roads, a fair bit of stopping and starting, a three mile commute might take 7 minutes by car or up to 14 minutes by bike. It might be 100% longer, but the nominal difference is only 7 minutes.

The marginal cost of the commute by car is petrol + depreciation due to increased mileage + some wear and tear, nicely estimated here. I think due to higher costs of motoring in the UK than US we will convert he numbers to pence without adjusting for exchange rate. So marginal cost per mile is £0.23. 3 miles, twice a day for 222 days a year = £306

Belgium's tax incentive of  0.20 € per kilometre equals £0.27 per mile = £360

So the toal incentive is equal to £666 per year, less £100 for a pair of tyres and a service.

I wonder how many would change mode for £566 per year?

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