Answers · UK 2025/26
How does the Cycle to Work scheme save tax in the UK?
The Cycle to Work scheme lets employees buy a bike and cycling equipment through salary sacrifice, saving Income Tax and National Insurance on the cost. A basic-rate taxpayer saves 32% (20% IT + 12% NI) on the value of the bike; a higher-rate taxpayer saves 42%. The employer must own the bike during the hire period.
Full answer
The **Cycle to Work scheme** is a government-backed employee benefit that lets you get a tax-efficient bike through your employer via salary sacrifice. It has been available since 1999 under HMRC's Section 244 EIM21664 guidance. **How it works:** 1. Your employer buys the bike (and eligible safety equipment) 2. You "hire" it back through salary sacrifice over a set period (typically 12 months) 3. During the hire period, your salary is reduced — saving IT and NI 4. At the end, you pay a small Fair Market Value (FMV) fee to own the bike outright **Tax savings by band:** | Tax band | IT rate | NI rate | Total saving | |---|---|---|---| | Basic rate | 20% | 8% | **28%** | | Higher rate | 40% | 2% | **42%** | | Additional rate | 45% | 2% | **47%** | **Example — £1,000 bike, basic-rate taxpayer:** Salary sacrifice of £1,000: save 20% IT + 8% NI = £280. Net cost of £1,000 bike = **£720**. **Scheme limits:** - **Standard bikes:** No upper limit imposed by HMRC — but many providers set a practical limit of £1,000 for standard bikes - **E-bikes:** No statutory limit; some employers offer up to £5,000 for e-bikes **Eligible equipment:** Safety equipment (helmets, lights, locks, hi-vis clothing) can also be included in the hire agreement — it all benefits from the same tax saving. **Hire period and ownership:** The employer must legally own the bike throughout the hire period. At the end, there are two options: - **Extended use agreement** (HMRC safe harbour): continue to hire for a further 3 years for a small annual fee (typically 3% of original value), then transfer for £1 - **Outright purchase:** Pay FMV — HMRC tables suggest 3% for standard bikes (after 12 months and £500+ value) and 7% for e-bikes **Employer NI savings:** The employer also saves 13.8% NI on the sacrificed salary — many employers pass this saving back as extra contribution to the scheme value or a top-up. **Self-employed exclusion:** The scheme requires an employer. Self-employed sole traders cannot use this scheme — but they can claim capital allowances on a business bike.
Try the calculator
This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.