Cycle to Work Scheme: How Much You Really Save (With Examples)

The cycle to work scheme lets you hire a bike from your employer through salary sacrifice, so the cost comes out of your gross pay before Income Tax and National Insurance. In 2026/27 that saves a basic-rate employee 28% of the price and a higher-rate employee 42% — but once you add the end-of-hire fee you pay to keep the bike, the real saving is usually closer to 21% and 35% respectively.

The scheme is still one of the cheapest ways to buy a bike if you commute on it. It is a poor deal if you are near the minimum wage, likely to change jobs soon, or you could buy the same bike in a sale.

Key points

• Savings come from your marginal tax and NI rate: 28% (basic), 42% (higher), 47% (additional) in England, Wales and Northern Ireland — up to 62% between £100,000 and £125,140.
• Scottish taxpayers earning between about £43,662 and £50,270 get 50% (42% tax plus 8% NI) — the best rate anywhere in the UK below £100,000. Between £100,000 and £125,140 a Scottish taxpayer gets 69.5%, because the Personal Allowance taper stacks on the 45% advanced rate.
• You do not own the bike during the hire period. To keep it you either pay a market-value transfer fee or extend the hire, which typically adds 3% to 7% of the original price.
• The bike must be used mainly for qualifying journeys — the informal "50% rule".
• Lower gross pay can affect mortgage affordability, statutory pay and, in some schemes, your pension contributions.

How the cycle to work scheme works

Cycle to work is not a discount scheme and your employer is not lending you money. Technically, your employer (or a scheme administrator acting for them) buys the bike and hires it to you. You agree to give up part of your gross salary for a fixed hire period — usually 12 or 18 months — in exchange for the use of the bike and any safety accessories.

Because the sacrifice happens before tax, you never receive that slice of salary, so you never pay Income Tax or National Insurance on it. The bike itself is exempt from being taxed as a benefit in kind, provided the scheme conditions are met. Your employer also saves employer's National Insurance at 15% on the sacrificed pay above the £5,000 secondary threshold, which is why many are happy to run a scheme.

The steps in practice

1. Your employer signs up to a scheme, or runs one in-house.
2. You choose a bike and accessories (helmet, lights, lock, mudguards, panniers, clothing) up to the scheme's limit.
3. You sign a hire agreement and a salary sacrifice variation to your employment contract.
4. The cost is deducted from your gross pay in equal instalments over the hire period.
5. At the end, you pay a transfer fee, extend the hire, or hand the bike back.

The 50% rule

For the tax exemption to apply, the bike must be used mainly for qualifying journeys — commuting between home and work, or travelling between workplaces. "Mainly" is generally taken to mean at least 50% of the mileage. You do not have to keep a mileage log and nobody inspects your rides, but the condition is real: the exemption is for commuting equipment, not for a weekend road bike. Leisure use on top is fine.

Two other conditions matter. The scheme must be available to all employees in a broadly similar way, and ownership must not transfer to you at the start of the arrangement. That second rule is the reason the end-of-hire fee exists.

How much can you spend?

There is no tax limit on the value of the bike. Many schemes still cap spending at £1,000 because that is the limit under a group consumer credit licence; administrators and employers with full FCA authorisation can offer higher values, and e-bike-friendly schemes often go to £3,000 or more.

Savings by tax band in 2026/27

Your saving equals the Income Tax rate plus the National Insurance rate that applies to the slice of salary you give up. That is why the same bike costs two colleagues different amounts.

England, Wales and Northern Ireland

Scotland

Scottish rates apply to non-savings income, and they do not line up with the National Insurance thresholds. That produces one unusually good band and one unusually punishing one.

A Scottish employee earning between £100,000 and £125,140 also loses £1 of Personal Allowance for every £2 of income over £100,000. Each £1 of pay in that range therefore costs 45p of advanced-rate tax, plus tax at 45% on the 50p of allowance withdrawn — another 22.5p. That is 67.5% Income Tax, and with 2% National Insurance the relief on that slice of pay is 69.5%. It is the highest-value band in the UK for any salary sacrifice. The same taper gives 62% in the rest of the UK, where the rate it stacks on is 40%.

Worked example: a £1,200 bike over 12 months

Take a bike and accessories priced at £1,200 including VAT, sacrificed at £100 of gross pay a month for 12 months, with a 7% ownership fee at the end (the typical figure for a bike originally costing £500 or more, explained in the next section).

The arithmetic for the basic-rate row: £1,200 × 28% = £336 of tax and NI you no longer pay, so your take-home falls by £1,200 − £336 = £864, or £72 a month. Add £84 to own the bike and you have paid £948 for a £1,200 bike.

One wrinkle: if the sacrifice pushes you from just above a threshold to just below it, part of the relief is at the higher rate and part at the lower one. Someone on £50,800 giving up £1,200 gets 42% on the first £530 and 28% on the rest. Our salary sacrifice calculator handles that blend for you.

The end-of-hire fee — where the headline saving leaks away

Because ownership cannot be promised at the start, something has to happen when the hire ends. You have three routes.

1. Pay the market value and own it

HMRC publishes accepted valuation percentages so employers do not have to get bikes appraised. As a proportion of the original price including VAT, the commonly used figures are:

Buying our £1,200 bike outright after 12 months would cost £300 — wiping out almost all of a basic-rate employee's £336 tax saving. This is the route that turns "save 28%" into "save 3%".

2. Extend the hire, then take ownership cheaply

Most schemes avoid the problem by extending the hire for three or four more years at no further monthly cost, usually in return for a small refundable deposit. At the end of the extended period the bike is worth 3% or 7% of its original price, and the deposit is kept as the transfer payment. That is where the £84 in our example comes from. You keep using the bike throughout; the only downside is that it is not formally yours for several years.

3. Return the bike

You hand it back and pay nothing more. Almost nobody does this, but it is the option that makes the arrangement a genuine hire.

Disadvantages of the cycle to work scheme

• You are locked in. Salary sacrifice agreements can normally only be broken on a "lifestyle event" — not because you changed your mind about the bike.
• Leaving your job is expensive. If you resign or are made redundant mid-hire, the outstanding balance is usually taken from your final net pay, with no tax or NI relief on that part. A £1,200 bike abandoned after three months can end up costing close to full price.
• Lower gross pay has knock-on effects. Reduced salary can affect mortgage affordability checks, statutory maternity, paternity and sick pay, and earnings-related benefits or redundancy calculations.
• Pension contributions can fall if your scheme bases contributions on post-sacrifice pay. Many employers protect pensionable pay, but it is worth checking.
• You cannot sacrifice below the minimum wage. Salary sacrifice must not take your pay below the National Living Wage or National Minimum Wage, which rules out or limits the scheme for lower-paid staff.
• The bike is not yours during the hire. You cannot sell it, and you are generally responsible for insuring and maintaining it.
• Limited choice and full list prices. Scheme administrators charge retailers a commission, so discounting is rare. A 20% sale price paid in cash can beat a 21% net saving on the list price.
• Not available if you are self-employed or not paid through PAYE. Sole traders instead claim the business-use share of a bike as a capital allowance against profits.

Is the cycle to work scheme worth it?

It is usually worth it if all of the following are true: you are a higher-rate or additional-rate taxpayer, or a Scottish taxpayer in the 50% band; you expect to stay with your employer for the whole hire period; you will actually commute on the bike; and the bike you want is not heavily discounted elsewhere. A 35% to 43% saving on a £1,500 e-bike is real money that no retailer promotion is likely to match.

It is marginal for a basic-rate taxpayer buying a cheap bike. On a £400 bike, a 28% relief saves £112, and an 18% market value after a year costs £72 — a net saving of £40 on a purchase you could probably match in a sale, in exchange for a multi-year hire agreement.

There is one extra angle that retailer pages never mention. Because salary sacrifice reduces your adjusted net income, it can also pull you back under a cliff-edge threshold. If your income sits just above £60,000 it reduces the High Income Child Benefit Charge, which applies between £60,000 and £80,000. If it sits between £100,000 and £125,140 it restores part of your Personal Allowance, producing the 62% relief in the table above. Those effects are worth more than the bike in some cases, and the same logic applies to other sacrifices such as pension contributions — see our guide to how salary sacrifice works.

Employers should follow the Department for Transport's cycle to work scheme implementation guidance, and the tax treatment of bicycles provided to employees is set out in HMRC's guidance on expenses and benefits: bikes for employees.

What to do next

Work out what the bike will actually cost you before you sign anything. Put the bike price and your salary into the salary sacrifice calculator to see the monthly hit to your take-home pay and your true percentage saving, then add the end-of-hire fee from the table above. If you also want to see how a sacrifice changes your overall tax position, including the Personal Allowance taper, run the numbers through the income tax calculator.