Cycle to Work Scheme Tax Relief 2025-26
The Cycle to Work scheme lets you buy a bike tax-efficiently through salary sacrifice, saving 30-50% on the cost. Here is everything you need to know about how it works in 2025-26.
What Is the Cycle to Work Scheme?
The Cycle to Work scheme is a government-backed initiative that allows employees to obtain a bike (and accessories) through their employer at a significant tax and NI saving. The employer purchases the bike and "hires" it to you. You repay the cost through salary sacrifice over an agreed period, typically 12 or 18 months, meaning your gross salary is reduced, and you pay less income tax and National Insurance as a result.
The scheme operates under an HMRC exemption introduced in 1999. It has been extended several times, and since 2019, there is no statutory upper spending limit.
How Salary Sacrifice Works
Under salary sacrifice, you and your employer agree to reduce your gross (pre-tax) salary by the cost of the bike spread over the hire period. Because you are taxed on a lower salary, you pay less income tax and National Insurance. Your employer also pays less employer's National Insurance, a saving they may pass on to you.
Example: You want a bike costing £1,200. Your employer spreads this over 12 months, reducing your gross pay by £100/month.
- Basic rate taxpayer: you save 20% IT + 8% NI = 28% per month, so each £100 only costs you £72 net. Total paid = £864 (saving £336).
- Higher rate taxpayer: you save 40% IT + 2% NI = 42% per month, so each £100 only costs you £58 net. Total paid = £696 (saving £504).
Typical Savings by Tax Rate
| Bike Cost | Basic Rate Saving (approx.) | Higher Rate Saving (approx.) |
|---|---|---|
| £500 | ~£140 | ~£210 |
| £1,000 | ~£280 | ~£420 |
| £2,000 | ~£560 | ~£840 |
| £3,000 | ~£840 | ~£1,260 |
Actual savings vary slightly depending on whether your employer passes on their employer NI saving (around 15% of the salary sacrificed). Many scheme providers include this in the headline saving figure.
What Can You Buy?
HMRC's guidance allows the purchase of:
- Conventional bikes (road, mountain, hybrid, folding)
- Electric bikes (e-bikes), no speed restriction
- Cargo bikes and adapted bikes
- Safety equipment: helmets, hi-vis jackets, gloves
- Lights, locks, panniers, and bags
- Cycling clothing (if primarily for safety)
The bike must be used at least partly for qualifying journeys, commuting to and from work or travelling between workplaces. Private use is allowed alongside this, but the bike cannot be used solely for leisure.
Spending Limits
Since 2019, there is no statutory upper limit set by HMRC. However, individual employers and third-party scheme administrators (Cyclescheme, Bike2Work Scheme, Evans Cycles Ride-to-Work, etc.) impose their own caps. Common employer limits are £1,000-£5,000. For higher-value cargo bikes or specialist equipment, some schemes allow up to £10,000 or more.
If your employer's scheme cap is too low, ask HR whether an exception can be made, or whether they use a different scheme provider with higher limits.
End of the Hire Period
At the end of the hire period, you technically return the bike to your employer. In practice, most employers offer one of two options:
- Extended use agreement: You keep using the bike under a nominal monthly charge (typically £1-£5) for a further year, after which ownership transfers to you.
- Purchase at fair market value: You buy the bike from your employer at its depreciated value. HMRC tables suggest fair market value of 25% for bikes over £500 after 12 months.
How to Join
The Cycle to Work scheme is employer-led, your employer must participate. Steps to join:
- Check whether your employer participates (ask HR or payroll)
- If they do, obtain a "hire agreement" or voucher from the scheme provider
- Use the voucher at participating retailers to choose your bike and accessories
- Your salary is reduced by the agreed amount over the hire period
If your employer does not offer the scheme, you can suggest they sign up, it saves them employer NI too, making it cost-neutral or even beneficial for them.
Frequently Asked Questions
How much can I save with the Cycle to Work scheme?
A basic rate taxpayer saves around 28-32% on the cost of a bike (income tax + NI). A higher rate taxpayer saves around 42-52%. On a £1,000 bike, a basic rate taxpayer pays roughly £680-720; a higher rate taxpayer pays around £480-580.
Is there a spending limit on the Cycle to Work scheme?
There is no statutory upper limit since 2019, but individual employers and scheme providers set their own caps, typically £1,000 to £5,000. Check with your employer or HR team.
What can I buy on the Cycle to Work scheme?
Bikes (including e-bikes), safety equipment (helmets, hi-vis clothing), lights, locks, panniers, and cycling clothing. The bike must be used at least partly for commuting to qualify.
What happens at the end of the Cycle to Work agreement?
At the end of the hire period you can usually purchase the bike at its fair market value, typically a small fraction of the original cost, or enter an extended use agreement before ownership transfers.