32–47%
Typical saving via salary sacrifice
£5,000
Max bike value most schemes allow
1999
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 National Insurance (13.8%)
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 |
Employer savings too: Employers save 13.8% Employer NICs on the sacrificed salary. Many employers pass some or all of this saving on to employees, sometimes offering admin-fee-free schemes or contributing towards the bike cost. This can push the effective saving even higher than the figures above.
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
Not covered: Regular non-cycling clothing, gym equipment, general accessories not related to cycling safety, and bikes that cannot be used for commuting (e.g., BMX racing bikes used only for sport, though this is rarely enforced strictly). When in doubt, check with your scheme provider.
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.
Cyclescheme
Largest UK provider, partnered with over 2,000 retailers including Halfords, Evans Cycles, and independent bike shops. No upper value limit (subject to employer policy).
Evans Cycles Ride-to-Work
Operated through Evans Cycles stores and website. Suitable for employees who prefer to buy in-store with expert advice.
Halfords
One of the most accessible providers with stores nationwide. Good for entry-level to mid-range bikes and accessories.
Gogeta
Popular with small and medium employers. Allows multiple purchases in one year and offers flexible end-of-hire options.
Green Commute Initiative
Specialises in larger-value orders (including cargo bikes and premium e-bikes). No upper value limit.
Salary Extras
Multi-benefit platform that includes Cycle to Work alongside other workplace benefits. Common in larger corporate employers.
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.
Alternative end-of-hire options: Some employers simply extend the hire for a further nominal fee (e.g., £1/month) rather than requiring a lump sum payment. Others may gift the bike to you. Make sure you understand your employer's end-of-hire policy before signing up.
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
Frequently Asked Questions
How does the Cycle to Work scheme work?
Your employer purchases a bike and cycling equipment and loans it to you under a hire agreement. You repay the cost through monthly salary sacrifice deductions over 12–18 months. Because these come from your pre-tax salary, you save on income tax and National Insurance. At the end of the hire period, you pay a small fair market value payment (typically 5–7% of the original price) to own the bike.
How much can I save on the Cycle to Work scheme?
The saving depends on your tax rate. Basic rate (20%) taxpayers save approximately 28% (20% tax + 8% NI). Higher rate (40%) taxpayers save approximately 42% (40% tax + 2% NI). Additional rate taxpayers save approximately 47%. Employer NI savings may be passed on, increasing the effective saving further. On a £1,000 bike, a basic rate taxpayer pays approximately £720 effective cost; a higher rate taxpayer around £580.
Is there a limit on bike value in the Cycle to Work scheme?
There is no statutory upper limit on bike value — the government removed the previous £1,000 cap in 2011. However, individual employers and scheme providers may set their own limits. Most modern schemes allow bikes up to £5,000 in value, and some providers (like Green Commute Initiative) have no limit at all. The practical limit is often set by what the employer and scheme provider agree to administer. Check your employer's specific scheme terms.
What equipment is included in the Cycle to Work scheme?
The scheme covers bikes and HMRC-defined 'cycling safety equipment': helmets, lights, reflectors, bells, mirrors, locks, panniers, child seats, pumps, puncture kits, cycle-specific clothing (high-vis vests, cycling jackets), and route maps for cycle journeys. General clothing, standard sports equipment, and non-cycling accessories are not covered. When bundling equipment with a bike purchase, keep the bike as the primary item.
Do I have to use the bike mainly for commuting?
Yes, HMRC rules require the bike to be used at least partly for commuting to your workplace. You do not need to cycle every day — using the bike for commuting even a few days per week satisfies the requirement. You are allowed to use the bike for leisure and sport as well. You are not required to prove or log your commuting journeys, and employers are not obligated to verify compliance actively.
Are electric bikes included in the Cycle to Work scheme?
Yes, electric bikes that meet UK e-bike regulations (EAPCs: motor up to 250W, maximum assisted speed 15.5mph, pedal assist only) are fully covered by the Cycle to Work scheme. In fact, the removal of the £1,000 cap in 2011 was partly motivated by the need to accommodate quality e-bikes. Most quality commuter e-bikes cost £1,500–£4,000, making the scheme particularly valuable for e-bike purchasers.
What happens to the bike at the end of the hire period?
At the end of the hire agreement, you can purchase the bike from your employer at its fair market value — HMRC guidance sets this at 5–18% of the original price depending on value and how long you've had it. A £1,000 bike after 12 months would cost approximately £70 to buy. Alternatively, your employer may extend the hire for a nominal monthly fee or gift you the bike. You should be informed of your options when you sign up to the scheme.