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. It was therefore something of a surprise that the Chancellor did not introduce a cap in the November 2025 Budget, particularly given that some cycles can cost more than £5,000.

The scheme has become increasingly popular, which is unsurprising given the potential tax savings for both employees and employers.

Typical scenario

After registering with a cycle-to-work scheme provider, an employer purchases a cycle and hires it to an employee, often under a salary sacrifice arrangement. The hire period will typically be between 12 and 18 months.

• The cost of the cycle is repaid by the employee through gross monthly salary deductions.
• If monthly deductions are, for example, £400, a higher-rate taxpayer could save around £160 in income tax each month, plus a small amount of national insurance contributions (NICs).
• The employer would save NICs of approximately £60 per month.

The scheme must be offered across the whole workforce, although this does not necessarily need to be via a salary sacrifice arrangement.

At least 50% of the cycle’s use must be for qualifying journeys, generally meaning commuting to and from work.

End of the hire period

At the end of the hire period, the employee has several options. They can return the cycle to the provider or extend the hire agreement, usually for a nominal fee.

In practice, many employees choose a third option – taking ownership of the cycle by paying a fair market value to the employer.

• For a cycle that is one year old and originally cost more than £500, HMRC will typically accept a disposal value of 25% of the original price.
• This percentage is lower for older cycles and those costing less than £500.

Further guidance

Detailed guidance on the cycle-to-work scheme for employers can be found on the HMRC website: Cycle to work scheme guidance (note that the NIC rates in the guidance are out of date).

Looking to introduce or review a cycle-to-work scheme?
If you would like advice on implementing a scheme or understanding the tax benefits, please email us imagine@hurst.co.uk or call 0161 477 2474.