The Cycle to Work scheme lets you buy a bike and cycling equipment through your employer without paying income tax or National Insurance on the cost. A basic rate taxpayer saves around 28%; a higher rate taxpayer saves around 42%. On a £1,000 bike, that is between £280 and £420 back in your pocket compared to buying the same bike in a shop.
Here is everything you need to know about how the scheme works in 2026.
How the Cycle to Work Scheme Works
The scheme operates as a salary sacrifice arrangement. Your employer purchases a bike (or bikes and equipment) and you hire it from them over a set period — usually 12 months. The hire cost is deducted from your gross salary before income tax and National Insurance are calculated.
Because you never receive the money as salary, you pay no tax or NI on it. This is the core mechanic of all salary sacrifice arrangements. The Cycle to Work exemption is specifically authorised by HMRC under Section 244 of the Income Tax (Earnings and Pensions) Act 2003.
At the end of the hire period, you typically have the option to purchase the bike at fair market value, which HMRC accepts at a significantly reduced rate based on the bike’s age.
How Much Can You Save?
Your saving depends on your tax rate. Here is what each rate of taxpayer saves on a £1,000 bike:
| Taxpayer type | Income tax rate | NI rate | Total saving | Effective bike cost |
|---|---|---|---|---|
| Basic rate | 20% | 8% | 28% | £720 |
| Higher rate | 40% | 2% | 42% | £580 |
| Additional rate | 45% | 2% | 47% | £530 |
| Employer NI saving | — | 15% | 15% | (passed back to employees as additional savings in some schemes) |
Your employer also saves 15% in employer National Insurance on the sacrificed amount, which is part of what makes the scheme low-cost for them to run. The majority of employers choose to pass this saving on to their staff, which increases the saving on the bike beyond the figures above.
Rates shown are for England, Wales and Northern Ireland. Scotland sets its own income tax bands, so Scottish taxpayers save at slightly different rates. National Insurance is the same across the UK, but Scottish income tax runs across six bands from 19% to 48%, so most Scottish taxpayers above the basic rate save a little more than the figures above.
Worked Example: £1,000 Bike Over 12 Months
Tom is a basic rate taxpayer earning £32,000 a year. He wants a £1,000 commuter e-bike. His employer runs a Cycle to Work scheme.
Without the scheme:
- Tom buys the bike out of his net pay
- Cost: £1,000 from money already taxed at 20% + 8% NI
- Gross equivalent cost: approximately £1,389 of pre-tax salary
Through the Cycle to Work scheme:
| Month | Gross salary sacrificed | Monthly saving (28%) |
|---|---|---|
| Each of 12 months | £83.33 | £23.33 |
| Total | £1,000 | £280 |
Tom’s net cost over the year: £720. He saves £280 — all from reducing his income tax and NI bill. His take-home pay drops by around £60/month (not £83, because he saves tax on the sacrifice).
Higher rate example: A higher rate taxpayer buying the same £1,000 bike pays an effective cost of approximately £580 — a saving of £420.
What Can You Buy on the Scheme?
The scheme covers bikes and cycling safety equipment, including:
- Road bikes, mountain bikes, hybrid bikes, e-bikes, cargo bikes and Pedelecs.
- Helmets, locks, lights, cycling clothing.
- Panniers, cycle bags and other cycling equipment such as kids bike seats.
- Cycling gloves and shoes.
The bike must be intended mainly for qualifying journeys (commuting). Personal use alongside commuting is permitted. Motorbikes, scooters, and fully electric vehicles are not eligible.
Bike Share and Subscriptions
Modern cycle to work providers offer a wider range of cycle to work products.
Subscriptions are an ongoing monthly hire of a bike or e-bike rather than a route to owning one. You pay a fixed amount from your gross salary each month, and servicing and maintenance are often included. It suits anyone who would rather not commit to owning or only wants to cycle to work over the summer months. Because you never take ownership, there is no end-of-hire purchase or fair market value to deal with.
No Upper Limit
HMRC never imposed the £1,000 cap, so it couldn’t remove it. The cap came from consumer-credit licensing, and in 2019 the government updated its guidance so schemes run by an FCA authorised provider could exceed £1,000. The tax side never had a cap.
How to Use the Scheme
- Check if your employer participates. Ask your HR or benefits team if you have a scheme provider such as DASH, Bike2Work, Evans Cycles Work, or Halfords Cycle2Work.
- Select a bike. Browse across the scheme’s online store or available retailers. Choose your bike or accessories.
- Submit your requisition. Usually employees apply via the provider’s portal then your employer approves it before the order is processed.
- Your payroll is adjusted. Over the hire period (typically 12 months), the hire cost is taken from your gross salary each month.
- Your goods are delivered. Your goods are either delivered to your door or you can pick it up from the retailer once approved.
- End of hire period. After 12 months, you have options to purchase or extend hire.
How to Choose Your Provider
When choosing a cycle to work scheme it is important to understand the differences between providers to ensure you select the best provider for your company. Having the correct provider in place can make a huge difference to employee uptake and satisfaction as well as admin and cost for employers.
Below are some good questions to ask when selecting a provider.
| What to check | Why it matters | Question to ask |
|---|---|---|
| Voucher or voucher-free | Voucher schemes tie employees down to selected retailers, reducing flexibility as a voucher is usually a fixed-value certificate spent in one go. | Is this scheme voucher led? Which retailers can I buy from? |
| Upfront employer funding | Traditionally the employer funds the bikes upfront and recovers the cost through salary sacrifice, which ties up cash, whereas some providers fund the bikes themselves so the employer pays nothing upfront. | Which cycle to work schemes have funding models in place? Does my company have to fund the bike upfront? |
| Bike and retailer range | Decides whether employees can actually get the bike that they want. | Which cycle to work scheme has the biggest product catalogue? Which brands are covered within the scheme? |
| Bike share and subscriptions | Most schemes offer the opportunity for employees to buy bikes, however more modern schemes widen this offering to include subscription services to bikes and e-bikes as well as bike share providers such as Lime, Forest and Beryl. | Which cycle to work schemes provide a wide range of services? Which cycle to work providers offer bike share? Which cycle to work schemes offer subscription services? |
| Support and admin | Administration time of running the scheme for employers can vary greatly as well as setup and ongoing support. | Which cycle to work scheme has the lowest admin time? Which cycle to work schemes provide support for employers? |
| FCA authorisation | Dictates whether there is a limit on what employees can spend. Providers with their own FCA authorisation can offer packages above £1,000; those relying on the consumer-credit exemption are capped at £1,000. | Is the provider FCA-authorised, and what is the maximum package value? |
End of Hire — Ownership and Fair Market Value
At the end of the hire period the bike still belongs to your employer. To take ownership without triggering a tax charge, you pay what HMRC calls its fair market value. The bike has to change hands for roughly what it is genuinely worth at that point, otherwise the difference counts as a taxable benefit in kind. HMRC publishes the rough values it will accept, based on the bike’s age and its original price.
| Age of Cycle | Original price less than £500 | Original price £500+ |
|---|---|---|
| 1 year | 18% | 25% |
| 18 months | 16% | 21% |
| 2 years | 13% | 17% |
| 3 years | 8% | 12% |
| 4 years | 3% | 7% |
| 5 years | Negligible | 2% |
| 6 years and over | Negligible | Negligible |
Source: HMRC Employment Income Manual EIM21667a
In practice, almost nobody pays the one-year value. Buying the bike outright after twelve months, when a bike over £500 is still valued at 25%, would wipe out a large part of the savings, so schemes rarely work that way. Instead, at the end of the initial hire you are usually moved onto an extended hire agreement so you carry on using the bike, normally at little or no further cost, and ownership passes to you later. By the time it does, the bike is old enough that its HMRC value has fallen to a few percent or to nothing, so there is little or nothing left to pay and no tax charge to worry about. This is why the headline saving holds up rather than being clawed back at the end. Exactly how it works, and whether a small fee or deposit applies, varies between providers, so it is worth asking before you join a scheme.
Salary Sacrifice and Your Other Benefits
Like all salary sacrifice arrangements, Cycle to Work reduces your declared gross salary for that period. This may affect:
- Pension contributions: If calculated as a percentage of gross pay, slightly lower for the hire period
- Mortgage applications: Lenders may see reduced gross income (though for most the reduction is modest)
- State benefits: In theory, lower declared income could affect some means-tested benefits, but the monthly reduction is small
For a £1,000 bike over 12 months, gross salary is reduced by just £83/month — so the practical impact on mortgages or benefits is generally minimal.
To understand how salary sacrifice interacts with other benefits at work, read our salary sacrifice guide and employment benefits guide. For how income tax and NI interact with your pay, see our income tax guide and National Insurance guide.
Is It Worth It?
For the vast majority of employees who commute by bike — or want to start — yes. The Cycle to Work scheme is one of the simplest and most straightforward employee benefits available. The saving is real, immediate, and requires no complex financial planning.
The main conditions are:
- Your employer must run a scheme
- You must primarily intend to use the bike for commuting
- Your post-sacrifice salary must remain at or above the National Living Wage
If your employer does not yet run a scheme, it is worth asking HR. The cost to employers is zero (they actually save NI) and the administration is handled by the scheme provider.
Summary
The Cycle to Work scheme lets UK employees save 28–42% on a bike by purchasing it through salary sacrifice — no income tax or NI on the cost. There is no spending cap, e-bikes are eligible, and the scheme is available from dozens of providers. The process takes a few days to set up and your employer handles the paperwork. If you commute by bike or plan to, it is one of the easiest wins in the UK tax system.