Small Business Accountants

Can I claim using the cycle to work scheme?

The Cycle to Work scheme lets employers buy bicycles and safety equipment and loan them to employees via a salary sacrifice arrangement. Employees give up gross salary to cover the cost, saving income tax and National Insurance on the amount sacrificed. Employers also save employer NIC and can claim capital allowances and VAT on the purchase. Electric bikes are fully eligible and there is no upper cost limit.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 16 Apr 2026 1

Can I claim using the cycle to work scheme? - GoForma Tax Guides | UK Accountants & Tax Advisors

Key takeaways

Employees save income tax and National Insurance on the salary they sacrifice, making a GBP 1,000 bike cost as little as GBP 600 for a higher-rate taxpayer after tax and NIC savings.
Employers save employer National Insurance Contributions at 15% on the sacrificed salary, partially or fully offsetting the administration cost of running the scheme.
There is no upper cost limit on the scheme since the GBP 1,000 cap was removed in 2019, so high-value e-bikes and cargo bikes can be included without restriction.
The employer buys the bike and loans it to the employee; at the end of the hire period the employer can extend the loan, take the bike back, or sell it at HMRC fair market value.
HMRC fair market value guidance for used bikes typically puts the resale price at 18 to 25 percent of original cost after three years, keeping the end-of-scheme purchase affordable.

Employers who purchase bicycles and safety equipment for loan to employees can benefit from treating the purchase as capital expenditure eligible for corporation tax relief. VAT can also be claimed back on the purchase unless you are registered on the VAT flat rate scheme.

The loan of bicycles and safety equipment under the cycle to work scheme removes any tax charge to the employee that would usually arise on a taxable benefit.

Frequently asked questions

How does the Cycle to Work scheme work?

The employer purchases a bicycle and any approved safety equipment, then loans it to the employee under a hire agreement. In return, the employee agrees to a salary sacrifice, giving up a portion of their gross pay equal to the monthly hire cost. Because this reduces the employee's taxable pay, both income tax and National Insurance are saved on the sacrificed amount. The hire period is typically 12 months, after which separate arrangements apply for transfer of ownership.

How much can an employee save with the Cycle to Work scheme?

Savings depend on the employee's income tax rate and National Insurance band. A basic-rate taxpayer (20% tax plus 8% NIC in 2025/26) saves roughly 28p in every pound sacrificed. A higher-rate taxpayer (40% tax plus 2% NIC) saves around 42p per pound. On a GBP 1,500 e-bike, a basic-rate taxpayer saves approximately GBP 420 and a higher-rate taxpayer saves approximately GBP 630 compared with buying outright from net pay.

What do employers save with the Cycle to Work scheme?

Employers save employer National Insurance Contributions at 15% on any salary that employees sacrifice. For example, if ten employees each sacrifice GBP 1,000 over a scheme year, the employer saves GBP 1,500 in NIC. This saving can offset scheme administration costs and, in many cases, means the employer breaks even or profits from running the scheme. Employers also benefit from capital allowances and, where applicable, VAT recovery on the purchase cost.

Can employers claim capital allowances and VAT on bikes bought for the scheme?

Yes. Because the employer buys and retains ownership of the bicycle throughout the hire period, the purchase qualifies as capital expenditure. Under the Annual Investment Allowance, 100% of the cost can be deducted from taxable profits in the year of purchase. VAT can also be recovered on the full purchase price, unless the employer is on the VAT Flat Rate Scheme, in which case standard flat rate rules apply and input VAT recovery is restricted.

Is there a maximum value for bikes under the scheme?

No. The GBP 1,000 cap that once applied was removed in 2019 following updated Department for Transport guidance. Employers can now include any value of bicycle or safety equipment in a scheme, including premium e-bikes, cargo bikes and specialist cycling gear. This makes the scheme particularly attractive for electric bikes, which often carry a higher purchase price but are fully eligible since the scheme's inception.

Are electric bikes eligible for the Cycle to Work scheme?

Yes, electric bikes have been eligible since the scheme began. They are treated identically to conventional bicycles under the rules. The removal of the GBP 1,000 cap in 2019 makes the scheme especially useful for e-bikes, since many quality models cost well above that figure. The only requirement is that the bike must be available for qualifying journeys such as commuting, though HMRC does not require employers to verify how often the bike is actually used.

What happens at the end of the hire period?

At the end of the hire period, the employer has three options: extend the loan for a further period, take the bike back and dispose of it, or sell it to the employee at fair market value. HMRC guidance indicates a bike in good condition is worth 18 to 25 percent of its original retail price after three years. Selling below fair market value creates a taxable benefit in kind, so employers should use an HMRC-compliant valuation.

Can company directors use the Cycle to Work scheme?

Yes, directors who are also employees of their company can participate in the Cycle to Work scheme on exactly the same terms as other employees. The director must receive a salary through PAYE and the hire agreement must be a genuine salary sacrifice arrangement, reducing the employment contract salary rather than being structured as an informal loan. Sole directors of one-person limited companies regularly use the scheme to save income tax and National Insurance in a legitimate and HMRC-accepted way.

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