There are no financial restrictions on the worth of bicycles that can be offered to employees under the cycle-to-work scheme. Thus, it came as a surprise when the Chancellor did not set a limit in the November 2025 Budget, especially considering that some bicycles can exceed £5,000. The cycle-to-work scheme has gained immense popularity, which isn’t surprising given the tax benefits involved.
Typical Scenario
Once registered with a cycle-to-work scheme provider, the employer procures the bicycle and leases it to the employee, likely through a salary sacrifice plan. The leasing term usually spans from 12 to 18 months. Employees repay the cost of the bicycle through monthly deductions from their gross salary.
For example, if the deductions amount to £400 each month, an employee in the higher tax bracket could save around £160 in taxes per month, along with a minor reduction in National Insurance contributions (NICs). In turn, the employer benefits from a £60 savings in NICs each month.
The cycle-to-work scheme must be available to the entire workforce, although a salary sacrifice arrangement is not a requirement.
At least half of the bicycle’s usage should be for qualifying journeys, which typically means commuting to work.
At the End of the Hire Period
After the hire period concludes, employees have the option to return the bicycle to the provider or extend the hire agreement, which involves a nominal fee.
Many employees often choose a third option: taking ownership of the bicycle by paying a reasonable market value to the employer. For a cycle that is only a year old and valued at over £500, HMRC approves a disposal value of 25% of its original price. The percentage decreases for older bicycles and those valued below £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guidance on the cycle-to-work scheme for employers can be found here (note that the rates of NICs in the guidance are out of date).