Typical saving via salary sacrifice
Max bike value most schemes allow
Year scheme was introduced
Cycle to Work Savings Calculator
What Is the Cycle to Work Scheme?
The Cycle to Work scheme is a government initiative that has been running since 1999 under the Finance Act 1999. It enables employees to obtain a bicycle and cycling safety equipment through their employer on a hire agreement, with repayments made via salary sacrifice from their pre-tax gross salary.
Because the repayments are deducted before tax and National Insurance are calculated, the effective cost to the employee is significantly reduced. The employer purchases the bike (or uses a scheme provider to do so) and the employee effectively "hires" it over the agreed period, typically 12 to 18 months.
Key facts about the scheme
- Introduced in 1999 under government Salary Sacrifice rules
- Savings of 32–47% depending on your tax rate
- No statutory upper limit on bike value (most schemes allow up to £5,000)
- Must be used at least partly for commuting to work
- The employer owns the bike during the hire period
- Electric bikes fully included
- Over 1 million bikes provided through the scheme so far
- Employer also saves on Employer NI (15%)
How Much Can You Save?
The saving depends on your income tax rate and National Insurance rate. Here is a breakdown for a £1,000 bike:
| Tax situation | Income tax saving | Employee NI saving | Total saving | Net cost |
|---|---|---|---|---|
| Basic rate (20%), NI 8% | £200 | £80 | £280 (28%) | £720 |
| Higher rate (40%), NI 2% | £400 | £20 | £420 (42%) | £580 |
| Additional rate (45%), NI 2% | £450 | £20 | £470 (47%) | £530 |
Example: £2,000 e-bike, higher rate taxpayer
| Item | Amount |
|---|---|
| Bike price | £2,000 |
| Monthly salary sacrifice (12 months) | £166.67/month |
| Income tax saving (40%) | £800 |
| Employee NI saving (2%) | £40 |
| Fair market value payment at end (7%) | £140 |
| Total effective cost | £1,300 (35% saving) |
What's Covered Under the Scheme?
Eligible bikes
- Standard bicycles of any type (road, mountain, hybrid, folding)
- Electric bikes (EAPCs — electrically assisted pedal cycles, motor up to 250W)
- Cargo bikes and family bikes
- Hand cycles and other cycle types for disabled users
Qualifying safety equipment
- Helmets (must meet EN1078 standard)
- Lights and reflectors
- Bells and horns
- Mirrors and cycle computers
- Locks and chains
- Panniers, baskets, and cycle trailers
- Child seats and child trailers
- Pumps and puncture repair kits
- Cycle clothing (high-visibility vests, cycling-specific jackets)
- Route maps for cycling
Major Cycle to Work Scheme Providers
Most employees access the Cycle to Work scheme through a specialist third-party provider. Your employer signs up with a provider, who manages the administration of the scheme. You then order your bike through participating retailers linked to that provider.
The Hire Agreement & End of Scheme
A key point many employees miss: during the hire period, your employer legally owns the bike. You are hiring it under a Consumer Credit Act-regulated agreement. This has important implications:
During the hire period
- The bike belongs to your employer — you cannot sell it
- If you leave your job, the remaining balance is usually collected as a final salary deduction or lump sum payment
- If the employer becomes insolvent, the scheme provider should still honour the agreement
- The bike should be insured — check your home contents policy and the scheme terms
End of hire: buying the bike
At the end of the hire period, HMRC guidance sets out the "fair market value" you pay to own the bike. This is a percentage of the original retail price:
| Original value of bike | Fair market value after 12 months | After 18 months |
|---|---|---|
| Under £500 | 18% | 16% |
| £500 – £999 | 12% | 10% |
| £1,000 – £5,000 | 7% | 5% |
So a £1,000 bike after 12 months would cost £70 to purchase outright at end of hire. After 18 months, it would cost £50. Many employers make this payment as nominal as possible to encourage scheme completion.
Small Employer Challenges
While large employers often have established Cycle to Work schemes, smaller businesses face more challenges:
- The employer must be able to recover the cost of the bike from future salary — if the employee earns less than minimum wage after sacrifice, the scheme cannot proceed
- Small employers may need to apply for consumer credit authorisation (FCA licence) unless using a third-party provider
- Administrative burden can be reduced significantly by using a full-service provider like Cyclescheme or Green Commute Initiative
- Self-employed individuals cannot use the Cycle to Work scheme as they cannot sacrifice their own salary
How Cycle to Work Scheme Works
This calculator applies the latest 2025/26 HMRC tax rates to estimate your tax position. The UK uses a progressive tax system where different portions of your income are taxed at different rates. Only income above the tax-free personal allowance is subject to tax, and each band applies only to the slice of income within that range.
Understanding your tax liability helps you make informed decisions about pension contributions, salary sacrifice, gift aid donations, and other tax-efficient strategies. This tool provides an estimate based on standard tax codes, though your actual position may differ if you have multiple income sources or special circumstances.
Key Information for 2025/26
The personal allowance is £12,570 (frozen until 2028). Basic rate: 20% on income from £12,571 to £50,270. Higher rate: 40% on income from £50,271 to £125,140. Additional rate: 45% on income above £125,140. The personal allowance reduces by £1 for every £2 earned above £100,000, creating an effective 60% rate between £100,000 and £125,140.
Example Calculation
On £42,000 annual income: £12,570 is tax-free, then £29,430 is taxed at 20% = £5,886 income tax. National Insurance adds £2,354 at 8% on earnings above £12,570. Total deductions: £8,240, leaving take-home pay of £33,760 per year or £2,813 per month.
Source: Based on official HMRC 2025/26 tax rates. Last updated March 2026.