UK Cycle to Work Scheme Saves You 32-47% on a New Bike

A £1,000 Bike for £530. Legally.

The Cycle to Work scheme is a UK government initiative that lets you get a new bike and accessories through your employer using salary sacrifice — meaning you pay from your pre-tax, pre-National Insurance income.

For a basic-rate taxpayer, that's a saving of about 32%. For a higher-rate taxpayer, it's around 42%. And for additional-rate taxpayers, it's up to 47%.

A £1,000 bike costs a basic-rate taxpayer approximately £680. A higher-rate taxpayer pays about £580. Spread over 12 months, that's less than £50-60/month deducted from your salary before tax.

How It Works

1. Your employer signs up with a Cycle to Work provider (Cyclescheme, Cycle Solutions, Green Commute Initiative, etc.)
2. You choose a bike from a participating retailer — many schemes now include online retailers
3. The scheme provider pays for the bike and leases it to your employer
4. Your employer leases it to you via salary sacrifice — typically over 12 months
5. At the end of the lease, you have the option to purchase the bike at a fair market value (usually 3-7% of the original price for bikes under £500, or a nominal amount)

The salary sacrifice reduces your gross pay, which means you pay less income tax and less National Insurance. The saving is automatic — you don't need to claim anything back.

What You Can Get

The scheme covers:

• Bikes — road, mountain, hybrid, electric (e-bikes up to 15.5mph)
• Safety equipment — helmets, lights, locks, high-vis gear
• Accessories — panniers, mudguards, pumps, maintenance kits

Originally capped at £1,000, the scheme has been uncapped since 2019. The Green Commute Initiative and some other providers offer bikes worth £5,000+, making high-end road bikes and quality e-bikes accessible through the scheme.

E-bikes are particularly popular. A £2,500 e-bike through salary sacrifice costs a higher-rate taxpayer approximately £1,450 — saving over £1,000.

Real Savings Examples

Bike Price	Basic Rate (20%)	Higher Rate (40%)	Additional Rate (45%)
£500	£340	£290	£275
£1,000	£680	£580	£530
£2,000	£1,360	£1,160	£1,060
£3,000	£2,040	£1,740	£1,590

These figures include the National Insurance saving, which is 8% for the employee in 2024-25.

How to Set It Up

Step 1: Ask your employer if they offer Cycle to Work. If they don't, suggest it — it costs them nothing (they actually save on employer's NI contributions) and many HR departments will set it up on request.

Step 2: Browse bikes online or in-store. Get a quote for the bike and accessories you want.

Step 3: Apply through your employer's chosen scheme provider. You'll get a certificate or voucher.

Step 4: Collect your bike from the retailer using the certificate.

Step 5: Your salary sacrifice starts — typically £X per month for 12 months, deducted before tax.

The End-of-Lease Question

After the 12-month hire period, the bike technically still belongs to the leasing company. You have three options:

• Buy it at fair market value. HMRC guidelines suggest this is 3% for bikes under £500 and 7% for bikes over £500 (after 1 year). So a £1,000 bike costs about £70 to keep.
• Extend the hire for a further period at a nominal monthly cost.
• Return it (almost nobody does this).

In practice, the ownership transfer fee is small enough that the total cost of the scheme is still significantly cheaper than buying retail.

Eligibility and Conditions

• You must be a PAYE employee (not self-employed)
• The salary sacrifice cannot take you below National Minimum Wage
• The bike should be used mainly for commuting (at least 50% of use), though HMRC doesn't rigorously enforce this
• You can use the scheme once per employer at a time (but you can take out a new one after completing the previous hire agreement)