Employer: Can self-employed people join the cycle to work scheme?
You are able to sign-up as an employer and participant with Cyclescheme as long as you receive a salary through the Pay-As-You-Earn (PAYE) system.
You can’t take part in Cyclescheme if you’re a sole trader. As a sole trader, you pay income tax and National Insurance once a year under Self Assessment, the amounts being based on your profits. This means sole traders do not pay tax and National Insurance through PAYE (and therefore cannot avail of the scheme). The exception would be for a sole trader who had a second job that did pay a salary (meaning they could potentially apply via the business that pays them a PAYE via salary).
You may be able to take part in Cyclescheme if you run your own limited company as a director, even if you’re the sole employee. With a single-person business like this, you’ll typically pay yourself a minimal salary through PAYE and take the bulk of your income as dividends. However, the salary you pay yourself is probably at or even below National Minimum Wage (unless you have a contract of employment with your own company; which is unlikely). If your PAYE salary is at or below National Minimum Wage then you would not be eligible to join the scheme - to become eligible you would need to increase the portion of your salary that is paid via PAYE. To proceed, you must be earning NMW after any salary sacrifice payments. So you must pay yourself at least NMW plus the value of the salary sacrifice you’ll be making via the scheme.
Your director’s salary will thus be larger in your annual accounts. You’ll still draw down dividends, but your administrative expenses will be larger by the increase you make in your director’s salary.
Director of limited company eligibility checklist:
✔ You run or own a limited company and are paid a portion of your income via PAYE
✔ The portion you are paid via PAYE is enough to afford the cycle to work page you want and still be paid NMW
If in doubt, chat to your financial advisor.