Cycle to Work Scheme 2026/27: Real Savings Explained
How the UK Cycle to Work salary sacrifice scheme works in 2026/27 - worked examples, true net cost after the end-of-hire fee, and the NLW floor trap for low earners.
Quick answer
Cycle to Work is a government-backed salary sacrifice scheme that lets a UK employee get a bike and accessories from gross pay, before income tax and National Insurance are taken. For 2026/27 a basic-rate taxpayer saves 28 per cent and a higher-rate taxpayer 42 per cent of the bike's value. On a GBP 1,200 bike that is GBP 336 or GBP 504 respectively, before a small end-of-hire fee.
The saving has three parts:
- Income tax at your marginal rate - 20 per cent, 40 per cent or 45 per cent - is never charged on the sacrificed amount.
- Employee National Insurance is not deducted - 8 per cent in the main band, 2 per cent above GBP 50,270.
- Your employer saves 15 per cent employer National Insurance on the sacrificed amount and may share part of it back.
Salary Sacrifice Calculator
Calculate how much tax and National Insurance you save by making salary sacrifice contributions to a pension, cycle to work scheme or EV car scheme.
Open Salary Sacrifice calculatorHow the 2026/27 saving is built
The mechanism is unchanged for 2026/27, but the rates matter. Employee Class 1 National Insurance is 8 per cent on earnings between GBP 12,570 and GBP 50,270, then 2 per cent above that. So the NI portion of your saving depends on where the sacrificed pay sits relative to GBP 50,270.
For a basic-rate taxpayer the combined relief is 20 per cent tax plus 8 per cent NI, a flat 28 per cent. For most of a higher-rate taxpayer's income the relief is 40 per cent tax plus 2 per cent NI, which is 42 per cent. Note the quirk: the NI part falls from 8 per cent to 2 per cent once you cross GBP 50,270, so a higher earner saves more tax but less NI than a basic-rate worker.
| Taxpayer band | Income tax saved | Employee NI saved | Total saving | Net cost of GBP 1,200 bike |
|---|---|---|---|---|
| Basic (20 per cent) | GBP 240 | GBP 96 | GBP 336 (28 per cent) | GBP 864 |
| Higher (40 per cent) | GBP 480 | GBP 24 | GBP 504 (42 per cent) | GBP 696 |
| Additional (45 per cent) | GBP 540 | GBP 24 | GBP 564 (47 per cent) | GBP 636 |
These figures exclude the end-of-hire transfer fee, covered below. They also assume the whole GBP 1,200 sits in one tax band; if your sacrifice straddles GBP 50,270, blend the rates.
Step by step: how a typical scheme runs
- Apply through your employer's provider - the larger ones are HMRC-certified.
- The employer buys the bike and accessories from a participating retailer.
- You sign a hire agreement, usually 12 months, at a fixed monthly sacrifice.
- Each month your gross pay drops by one twelfth of the bike value before tax and NI are worked out.
- At the end of the hire you choose to pay a one-off transfer fee, extend the hire for several years at no monthly charge so the eventual fee is lower, or return the bike.
Most riders take the extended-hire route. HMRC's fair market value matrix sets the percentage of the original price you must pay to own the bike, and that percentage falls the longer you have had it - so extending the hire and paying the smaller fee later is the cheapest way to end up owning it.
Worked example: Olivia, GBP 40,000 salary, GBP 1,400 e-bike
Olivia is a basic-rate taxpayer on GBP 40,000 buying a GBP 1,200 e-bike with GBP 200 of accessories - GBP 1,400 in total - over a 12-month hire.
| Component | Annual figure |
|---|---|
| Salary before sacrifice | GBP 40,000 |
| Cycle sacrifice over 12 months | GBP 1,400 |
| Adjusted gross | GBP 38,600 |
| Income tax saved (20 per cent of GBP 1,400) | GBP 280 |
| Employee NI saved (8 per cent of GBP 1,400) | GBP 112 |
| Total saving | GBP 392 |
| Real cash cost of the GBP 1,400 bike | GBP 1,008 |
After 12 months Olivia signs an extended-use agreement at no monthly cost and pays a transfer fee a few years later under HMRC's valuation matrix. Her effective cost lands well under GBP 1,400, and she has had years of riding before the small final payment.
Take-Home Pay Calculator
Calculate your net salary after income tax, National Insurance and student loan deductions.
Model the payslip effect with the take-home pay calculatorWorked example: James, GBP 55,000 salary, GBP 3,000 bike
Some employers run schemes up to GBP 3,000 or GBP 4,000, which requires FCA authorisation. James is a higher-rate taxpayer buying a GBP 3,000 bike, sacrificing GBP 250 a month.
| Component | Year 1 |
|---|---|
| Salary before sacrifice | GBP 55,000 |
| Cycle sacrifice | GBP 3,000 |
| Adjusted gross | GBP 52,000 |
| Income tax saved (40 per cent of GBP 3,000) | GBP 1,200 |
| Employee NI saved (2 per cent of GBP 3,000) | GBP 60 |
| Employer NI saved (15 per cent of GBP 3,000) | GBP 450 |
| Employee total saved | GBP 1,260 (42 per cent) |
James pays GBP 1,740 in real terms for a GBP 3,000 bike before any transfer fee. His employer also saves GBP 450 in employer National Insurance; a minority of schemes pass part of that back to the rider, which would improve the deal further.
What you can and cannot include
Eligible items usually cover the bike of any type - road, hybrid, electric, folding or cargo - plus safety and practical accessories:
- Safety equipment: helmet, lights, reflectors, hi-vis.
- Accessories: lock, mudguards, panniers, child seat, bell, pump, repair kit.
- Cycling-specific clothing.
Commonly excluded:
- GPS bike computers, in some schemes.
- Smartwatches and general fitness trackers that are not cycling-specific.
- Servicing, though some providers include a first service.
When the maths breaks down
The National Living Wage floor
Salary sacrifice cannot reduce your pay below the National Living Wage, which is GBP 12.71 an hour for workers aged 21 and over in 2026/27. Providers generally decline applications that would breach this. For workers near the minimum wage the scheme is capped or unavailable, so the benefit is concentrated among those comfortably above the floor.
Pension and statutory pay knock-on
Reducing gross pay can lower the earnings figure used for some workplace pensions, shrinking the employer or employee contribution depending on whether the scheme uses qualifying earnings, basic pay or full pay. Sacrificing during the reference period for statutory maternity or sick pay can also cut those entitlements, because they are based on average earnings. Plan the timing if either applies.
Mortgage affordability
Some lenders assess affordability on your post-sacrifice gross, the lower figure, which can trim borrowing capacity. Most now use the pre-sacrifice salary, but ask your broker before applying if a mortgage is imminent.
Comparing the routes
A GBP 1,200 bike, three ways:
Paying cash costs the full GBP 1,200. Cycle to Work for a basic-rate taxpayer costs about GBP 864 in real pay before the transfer fee, and roughly GBP 696 for a higher-rate taxpayer. A buy-now-pay-later or store credit deal at a typical APR can push the total above GBP 1,400 once interest is added. The scheme wins on price for anyone paying tax, provided you stay employed through the hire.
| Method | Approximate true cost |
|---|---|
| Cash | GBP 1,200 |
| Cycle to Work, basic-rate | GBP 864 plus a small final fee |
| Cycle to Work, higher-rate | GBP 696 plus a small final fee |
| Store credit at a typical APR | GBP 1,400 or more |
Scotland: a slightly different tax saving
National Insurance is not devolved, so the 8 per cent and 2 per cent NI savings are identical across the UK. Income tax is devolved in Scotland, where the bands run Starter 19 per cent, Basic 20 per cent, Intermediate 21 per cent, Higher 42 per cent, Advanced 45 per cent and Top 48 per cent. A Scottish intermediate-rate taxpayer saves 21 per cent tax plus 8 per cent NI, and a Scottish higher-rate taxpayer saves 42 per cent tax plus 2 per cent NI - a touch more than the equivalent rest-of-UK band. Use a calculator set to your nation to be precise.
Income Tax Calculator
Work out how much income tax you owe using the latest 2025/26 UK tax bands.
Check your marginal rate with the income tax calculatorWhen not to bother
- You are close to the National Living Wage - the scheme will be capped or refused.
- You expect to leave your job within 12 months - the outstanding balance becomes payable from net pay with no further relief.
- You are deep in the GBP 100,000 to GBP 125,140 personal-allowance taper, where each pound of sacrifice can attract a 60 per cent effective relief - here pension sacrifice usually delivers far more per pound than a bike.
- A genuine end-of-season clearance or 0 per cent finance deal beats the gross price.
Try the numbers
Salary Sacrifice Calculator
Calculate how much tax and National Insurance you save by making salary sacrifice contributions to a pension, cycle to work scheme or EV car scheme.
Salary sacrifice calculatorTake-Home Pay Calculator
Calculate your net salary after income tax, National Insurance and student loan deductions.
Take-home pay calculatorRelated reading:
Sources
- HMRC: Cycle to Work scheme implementation guidance (gov.uk).
- HMRC: Expenses and benefits, bikes for employees (gov.uk).
- HMRC: Salary sacrifice and the effects on PAYE (gov.uk).
- HMRC Employment Income Manual EIM21664: fair market value matrix for cycles.
Frequently asked questions
How much does the Cycle to Work scheme save in 2026/27?
A basic-rate UK taxpayer saves 28 per cent of the bike cost - 20 per cent income tax plus 8 per cent employee National Insurance. A higher-rate taxpayer saves 42 per cent - 40 per cent tax plus 2 per cent NI. On a GBP 1,200 bike that is GBP 336 or GBP 504 respectively, before any end-of-hire transfer fee. The exact figure depends on your salary, marginal rate and the value sacrificed.
Is there a maximum bike value?
There is no statutory cap since the 2019 rule change. However, employers and scheme providers set their own limits, commonly between GBP 1,000 and GBP 4,000. Schemes offering more than GBP 1,000 of credit need Financial Conduct Authority authorisation, so confirm the ceiling with your employer before assuming a high value is available.
Do I own the bike at the end of the hire period?
Not automatically. During the salary sacrifice period - usually 12 months - you hire the bike from your employer or scheme provider. At the end you can pay a final transfer fee based on HMRC's fair market value matrix, extend the hire for several years at no monthly cost so the fee falls, or return the bike. Most riders extend the hire then pay the reduced fee.
Does the saving change in Scotland?
The employee National Insurance saving is identical UK-wide because NI is not devolved. The income tax saving differs because Scotland sets its own bands - Starter 19 per cent, Basic 20 per cent, Intermediate 21 per cent, Higher 42 per cent, Advanced 45 per cent and Top 48 per cent. A Scottish higher-rate taxpayer therefore saves 42 per cent tax plus 2 per cent NI, slightly more than the rest of the UK on the tax portion.
Can salary sacrifice reduce my pay below minimum wage?
No. Salary sacrifice cannot take your gross pay below the National Living Wage, which is GBP 12.71 an hour for workers aged 21 and over in 2026/27. Scheme providers usually decline applications that would breach this floor. If you are close to the minimum wage the scheme may be capped or rejected, so it is most useful for workers comfortably above the threshold.
What happens if I leave my job mid-hire?
The outstanding balance of the hire agreement typically becomes payable from your net pay, with no further tax or NI relief on that catch-up amount. Some schemes deduct it from your final salary or require a lump sum. If you expect to change jobs within 12 months, factor the early-termination clause into your decision and read the agreement carefully before signing.
Can I include accessories and an electric bike?
Yes. The scheme covers bikes of any type, including electric and cargo bikes, plus safety equipment such as helmets, lights, locks and mudguards. Cycling-specific clothing can qualify. Items not specific to cycling, such as smartwatches or general fitness trackers, are usually excluded. Check your provider's eligible-equipment list, as some exclude bike computers or servicing.
Does sacrifice affect my pension or statutory pay?
It can. Reducing your gross pay lowers the earnings figure used for some workplace pension contributions, and it can reduce statutory maternity or sick pay if the hire overlaps the relevant reference period. The effect depends on whether your pension uses qualifying earnings, basic pay or full pay. Check your scheme rules before sacrificing if either is a near-term concern.
Which calculator should I use to model the saving?
Use a salary sacrifice calculator to see the gross-pay reduction and a take-home pay calculator to confirm the net effect on your payslip. Enter your salary and the value being sacrificed over 12 months. The calculator applies your marginal income tax rate and the 8 per cent or 2 per cent NI band automatically, giving you the monthly cash cost rather than the headline bike price.
Try the calculators
Salary Sacrifice Calculator
Calculate how much tax and National Insurance you save by making salary sacrifice contributions to a pension, cycle to work scheme or EV car scheme.
Take-Home Pay Calculator
Calculate your net salary after income tax, National Insurance and student loan deductions.
Income Tax Calculator
Work out how much income tax you owe using the latest 2025/26 UK tax bands.
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