Cycling to work tax savings continue
There is no financial limit on the value of cycles that can be provided to employees under the cycle-to-work scheme. Therefore, it was something of a surprise when the Chancellor did not impose a cap in the November 2025 Budget, especially as some cycles can cost over £5,000.
The cycle-to-work scheme has become extremely popular, which should be no surprise given the tax savings.
Typical scenario
After registering with a cycle-to-work scheme provider, the employer purchases the cycle and hires it to the employee, probably under a salary sacrifice arrangement. The hire period will normally be between 12 and 18 months.
- The cost of the cycle is repaid by the employee by gross monthly salary deductions.
- If the monthly salary deductions are, say, £400, this will save an employee paying tax at the higher rate of some £160 in tax each month – plus a small amount of national insurance contributions (NICs).
- The employer saves NICs of £60 each month.
The cycle-to-work scheme must be offered across the whole workforce (although this does not necessarily have to be through a salary sacrifice arrangement).
At least 50% of the cycle’s use must be for qualifying journeys – generally meaning the employee’s commute to work.
End of the hire period
At the end of the hire period, the employee can return the cycle to the provider, or they can extend the hire agreement; extension comes with a nominal payment. Therefore:
- Many employees will go for a third option, which is to take immediate ownership of their cycle by paying a fair market value to the employer.
- For a cycle just a year old and costing over £500, HMRC will accept a disposal value of 25% of the cycle’s original price.
The percentage is lower for older cycles and those costing less than £500.
Detailed guidance on the cycle-to-work scheme for employers can be found here (note that the rates of NICs in the guidance are out of date).
