Answers · UK 2025/26

How does the cycle-to-work scheme work for tax in the UK?

The cycle-to-work scheme lets employees hire a bicycle and safety equipment through salary sacrifice, saving Income Tax and National Insurance on the cost. The statutory exemption covers bikes and equipment used mainly for commuting. There is no statutory upper limit on the bike value, though many employers cap at £1,000 or £2,500 for cargo bikes. OpRA rules do not apply, so the full salary sacrifice saving is retained.

Last updated: 10 June 2026Last reviewed: 10 June 2026How we verify

Full answer

The cycle-to-work scheme is authorised under Section 244 Income Tax (Earnings and Pensions) Act 2003 and related NI regulations. It works as follows: the employer purchases or leases a bicycle and safety equipment and loans it to the employee; the employee sacrifices an equivalent amount of gross salary over an agreed period (typically 12 months). Because the OpRA rules contain a carve-out for cycles, the employee pays no tax or NI on the benefit in kind, and the employer pays no Class 1A NI. Tax and NI savings depend on the employee's marginal rates -- a basic rate taxpayer saves 20% Income Tax plus 8% NI (28% combined) on the amount sacrificed; a higher rate taxpayer saves 40% plus 2% (42%). At the end of the hire period, the employee usually has the option to purchase the bike at a "fair market value" which HMRC accepts at low residual percentages (around 3-7% of original value for bikes over 18 months old). Employer considerations: the employer must operate an approved scheme and ideally obtain a consumer credit licence or use a provider with one for schemes over £1,000. There is no statutory cap on the bicycle value under HMRC rules, but credit licensing rules affect how schemes above £1,000 must be structured. Most employer schemes partner with providers such as Cyclescheme, Vivup, or Evans Cycles. For 2026/27, salary sacrifice cycles remain fully outside OpRA, making this one of the last remaining salary sacrifice tax benefits for higher earners after the 2017 reforms.