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. You don’t pay tax and National Insurance through PAYE because you don’t receive a salary as such. Without a salary to sacrifice, you can’t take part in a salary sacrifice scheme like Cyclescheme. The exception would be for a sole trader who had a second job that did pay a salary.
You can 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. Probably the salary you pay yourself is at or even below National Minimum Wage; unless you have a contract of employment with your own company, which is unlikely, you are exempt from National Minimum Wage (NMW).
To be eligible to take part in Cyclescheme, you’ll have to pay yourself differently. You’re an employee of your company, and as with anyone on low wages, you must be earning NMW after any salary sacrifice payments. So you must pay yourself NMW plus the value of the salary sacrifice you’ll be making.
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.
If in doubt, chat to your financial advisor.