What is Cycle to Work Scheme?

Full Definition

The Cycle to Work scheme is a government-backed salary-sacrifice arrangement that lets an employee get a bicycle and safety equipment for commuting while saving tax. Your employer buys or hires the equipment and you give up an agreed amount of gross salary over a set period, usually 12 to 18 months. Because the deduction comes from pre-tax pay, you avoid Income Tax and employee National Insurance on that sum. A basic-rate taxpayer saves 20% Income Tax plus 8% NI on earnings between GBP 12,570 and GBP 50,270, while a higher-rate taxpayer saves 40% plus 2% above GBP 50,270, so total savings often reach 30% to 40%. The equipment legally belongs to the employer during the hire period; at the end you usually pay a small fair-market-value fee to keep it. Note that reducing gross pay can affect pension contributions and other earnings-linked benefits, so weigh the saving against any knock-on effects.

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