Cycle to Work: how to get a cheaper bike through your employer in the UK

Cycle to Work is a government scheme that makes a commuting bike noticeably cheaper. The employer provides the employee with a bike and equipment, and the cost is taken from salary before income tax and National Insurance are deducted. That makes the final cost to the employee lower than the shop price.

How does the scheme work?

It usually uses salary sacrifice: you agree to give up part of your salary for a time, and in return the employer provides the bike for your use (technically, hires it to you). Because the deduction comes out of pre-tax income, you pay no income tax or NI on that amount — which is where the saving comes from.

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Why is it tax-free?

GOV.UK explains that lending bikes to employees is not a taxable benefit if two conditions are met — the bike is available to all employees and is mainly used for getting to work. When they are met, the employer does not have to report the bikes to HMRC or pay tax and NI on them.

How much do you save and is there a price cap?

Your saving equals your income tax rate plus the NI you avoid on the amount sacrificed from salary. The scheme can be used not only for the bike but also for a helmet, lock, lights and other equipment. HMRC rules do not set a hard cap on the value, but an individual employer or scheme provider may have their own limit.

Who can take part?

Employees whose employer has set up the scheme can take part. A key salary-sacrifice limit: the deduction must not take your pay below the National Minimum Wage. So for lower-paid workers the amount available may be limited.

What happens at the end of the hire period?

At the end of the term the employer or provider usually offers options: extend the hire, return the bike, or buy it at a “fair market” residual value. The buy-out terms are set out in the scheme agreement in advance — check them before signing so you can work out the true saving.

Which bikes and equipment qualify?

The scheme is for bikes used to get to work, including e-bikes. Along with the bike you can get related equipment: a helmet, locks, lights, reflective clothing, a pump and mudguards. The key condition is that the bike is mainly used for commuting; personal rides at the weekend do not break this.

What if you change jobs during the hire?

The salary-sacrifice agreement is tied to your employer. If you leave before the end of the term, the remaining amount usually has to be paid from your after-tax salary — which reduces the saving. So before taking part, check your employer’s terms for leaving, and the final buy-out price of the bike at the end of the term: that is what determines the real saving.