How does the Cycle to Work scheme work in 2026?

Full answer

The Cycle to Work scheme is a government-backed salary sacrifice arrangement that allows employees to obtain a bicycle and cycling safety equipment tax- and NI-efficiently. **How it works** Your employer purchases the bike and leases it to you. You repay the cost via a reduction in gross salary (salary sacrifice) over an agreed hire period — typically 12, 24, or 36 months. Because the sacrifice reduces your gross pay, you save: - Income tax at your marginal rate (20%, 40%, or 45%) - Employee National Insurance at 8% (or 2% above £50,270) - Employer NI at 13.8% (saving the employer can pass on via lower lease cost) **2026 scheme limits** - Standard cycles and e-bikes: no statutory cap under the Consumer Credit Act exemption, but most schemes set a practical limit at £1,000 for conventional bikes and £3,000 for electric bikes. Employers offering above £1,000 must hold FCA consumer credit authorisation. **Qualifying equipment** Bikes, helmets, lights, locks, hi-vis clothing, and child seats all qualify. The cycle must be used mainly for qualifying journeys (commuting counts). **Worked example** A 40% taxpayer sacrifices £1,200 over 12 months for an e-bike. Saving: £1,200 × (40% + 8%) = £576 in tax and NI — effectively buying a £1,200 bike for £624. **End of hire** At the end of the period you can purchase the bike at its fair market value (HMRC's table-based values: typically 3–7% of original cost after 4+ years). Alternatively, the scheme provider may extend the loan.

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