Last updated: 14 October 2026
How does the tax-exempt cycle to work scheme work?
Employers can provide bicycles and cycling safety equipment to employees tax-free, as long as the bikes are mainly used for qualifying journeys, such as commuting, and the scheme is open to all employees. Most schemes work through salary sacrifice: the employee gives up part of their gross salary over 12 to 18 months in return for the bike, saving income tax and NIC on the sacrificed amount. There’s no statutory price cap, though many providers set limits. At the end, the employee can usually buy the bike for a fair market value.
How much employees save
| Taxpayer | Saving on a £1,500 bike |
| Basic rate (20% tax, 8% NIC) | about £420 (28%) |
| Higher rate (40% tax, 2% NIC) | about £630 (42%) |
| Additional rate (45% tax, 2% NIC) | about £705 (47%) |
The employer also saves 15% employer NIC on the sacrificed salary.
Conditions
- Bikes and equipment must be loaned, not given, during the hire period
- Used mainly for qualifying journeys (to work, or between workplaces)
- Available to all employees on similar terms
- Salary sacrifice can’t take pay below the National Minimum Wage
- E-bikes qualify; electric motorbikes don’t
Ownership at the end of the scheme
If the employee buys the bike when the hire ends at less than its market value, the difference is a taxable benefit. HMRC publishes guideline values: around 18% of the original price after 12 months for a bike costing £500 or more. Many providers offer extended hire for a small deposit instead, deferring the transfer.
Example
Lily, a basic rate taxpayer earning £30,000, sacrifices £1,200 over 12 months for an e-bike. Her gross pay falls to £28,800, saving £240 income tax and £96 NIC, so the bike costs her £864. Her employer saves £180 in employer NIC. At the end, she pays the market value set out in the scheme to own it.
Salary sacrifice cap
From April 2029, NIC relief on pension salary sacrifice is expected to be capped. Cycle to work schemes are not part of that change, but check how sacrifice affects your other benefits, such as mortgage applications and statutory pay.
Effect on other things
- Lower salary may slightly reduce SMP or pension contributions
- Student loan repayments are based on the lower salary
- Can help keep income below thresholds such as £100,000 or Child Benefit charge levels
Common mistakes
- Letting the bike be used mainly for leisure
- Reducing pay below minimum wage
- Transferring the bike below market value without reporting
- Excluding some staff from the scheme
Records to keep
Employers should keep the hire agreement, salary sacrifice agreement and transfer valuations.
Safety equipment
Helmets, lights, locks, panniers and reflective clothing can be included in the same package. They must be provided alongside the bike for use on qualifying journeys, and are covered by the same exemption.
Frequently asked questions
Can self-employed people use the scheme?
No, but they can claim business use of a bike.
Is there a limit on bike cost?
No legal limit, but providers may cap it.
Can directors join?
Yes, if they’re employees.
Does it count towards benefits?
No reporting if exempt.
Related: company car tax rises, bonus on a £95,000 income and employee reward schemes.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with employee benefits and salary sacrifice. See our payroll services service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
