A brand new bike at up to half price? Christmas has come early!

Getting on to two wheels? Then take advantage of a little-publicised government scheme that can halve the cost of your shiny new machine. Read this to find out how - or more importantly, get your boss to read this too. Employers are the vital link in this tax-saving chain.

What is it?

Cycle to Work is the official name of the government scheme designed to make bike ownership financially easier for employees. It can halve the cost of purchasing a machine.

The rationale is that by offering tax benefits on bike buying, it aims to minimise traffic on our crowded roads, cut back on pollution and improve public health.

The scheme first started in 1999 but was known to few. It was rebranded Cycle to Work last year.

How it works

At its simplest, Cycle to Work cuts the price of a new bike in half if you are a higher rate 40% taxpayer and by just over 40% if you pay income tax at the basic 22% rate.

It operates through your monthly pay packet, and is technically known as "salary sacrifice". Employers have to finance the purchase and then collect the cash from you each month by giving you a lower salary. You save on tax and national insurance because your employer reduces your salary each month to repay the cost of the bike.

Someone earning £48,000 a year would normally expect a monthly gross £4,000. But joining Cycle to Work and buying a £1,200 bike over the one-year pay-back period would reduce the salary each month by the £100 needed to pay for the bike, leaving £3,900 a month or £46,800 in a year.

You are taxed on the lower sum - effectively taking £100 a month out of the tax and national insurance equation - worth £418.75. Providing your employer is VAT registered, the tax is reclaimed by the firm, in this case a further £178.73. This gives a total saving of £597.48 - 49% of the bike's value.

Basic rate taxpayers save a little less. Someone earning £25,000 a year buying a bike package worth £500 would save £214.90 or 43% of the purchase price.

For more information visit this site www.cyclescheme.co.uk.