With National Bike Week taking place from 8–14 June 2026, many businesses are reconsidering whether they should introduce a Cycle to Work scheme for their employees.
The scheme has been available for years, yet thousands of UK employers still don’t offer it despite the financial benefits for both businesses and staff.
Beyond encouraging healthier lifestyles and greener commuting, the Cycle to Work scheme can reduce Income Tax, National Insurance contributions, and overall commuting costs, making it one of the most tax-efficient employee benefits available.
If you’ve been considering introducing a staff benefits programme, National Bike Week may be the perfect time to start.
What Is the Cycle to Work Scheme?
The Cycle to Work scheme is a government-backed salary sacrifice arrangement that allows employees to acquire bicycles and cycling equipment through their employer.
Instead of purchasing a bike outright using after-tax income, employees effectively spread the cost through monthly salary deductions taken before Income Tax and National Insurance are calculated.
This creates immediate tax savings while making cycling more affordable.
The arrangement benefits:
- Employees through reduced costs
- Employers through lower National Insurance contributions
- Society through reduced congestion and emissions
How Does the Scheme Work?
The process is relatively straightforward:
Step 1: Employee chooses equipment
The employee selects a bicycle and any eligible cycling accessories.
Step 2: Employer purchases the equipment
The employer pays for the equipment through an approved scheme provider.
Step 3: Salary sacrifice begins
The employee repays the cost through monthly deductions from gross salary.
Step 4: End-of-term options
At the end of the hire period, employees may:
- Continue the hire arrangement
- Transfer ownership at fair market value
- Follow other options offered by the scheme provider
Most providers handle the administration and documentation, making implementation relatively simple for employers.
What Equipment Can Be Included?
Many employees assume the scheme only covers bicycles, but the list is much broader.
Eligible items generally include:
Bicycles
- Road bikes
- Mountain bikes
- Hybrid bikes
- Folding bikes
- E-bikes
Safety equipment
- Helmets
- Reflective clothing
- Lights
- High-visibility accessories
Practical accessories
- Locks
- Panniers
- Mudguards
- Child seats
- Pumps and repair kits
What Cannot Be Included?
Certain items fall outside HMRC’s approved categories.
Examples include:
- GPS navigation units
- Action cameras
- Cycling computers with advanced navigation functions
- Car-mounted bike racks
Employers should communicate these restrictions clearly before employees apply to avoid misunderstandings.
How Much Can Employees Save?
The exact saving depends on an individual’s tax band.
Because repayments are taken from gross salary, employees save:
- Income Tax
- Employee National Insurance
Typical savings
Basic-rate taxpayers
Often save between:
- 30% and 39%
Higher-rate taxpayers
Often save between:
- 40% and 47%
Why Employers Benefit Too
While employee savings receive most of the attention, employers also benefit financially.
Because salary sacrifice reduces gross pay, employer National Insurance contributions are calculated on a lower amount.
Current employer National Insurance rates mean businesses can save approximately:
15% of the salary sacrificed
For organisations with multiple employees using the scheme, these savings can quickly accumulate.
Beyond Tax Savings: Health and Productivity Benefits
Financial savings are only part of the picture.
Research consistently links cycling to:
Improved employee wellbeing
Regular exercise is associated with:
- Better cardiovascular health
- Reduced stress levels
- Improved mental wellbeing
Reduced absenteeism
Healthier employees generally experience fewer sickness absences.
Increased productivity
Many cyclists report arriving at work more alert and energised compared to commuters sitting in traffic.
Environmental Benefits
Sustainability has become increasingly important for both employers and employees.
Cycle to Work schemes can help businesses:
- Reduce commuting-related emissions
- Support ESG objectives
- Demonstrate environmental commitment
- Enhance employer branding
For companies pursuing environmental targets, encouraging active travel can form part of a broader sustainability strategy.
Important Rules Employers Need to Know
Before launching a scheme, employers should understand several key requirements.
National Minimum Wage considerations
Salary sacrifice arrangements cannot reduce an employee’s pay below:
- National Minimum Wage
- National Living Wage
This may limit participation for some lower-paid employees.
Commuting Requirement
To qualify for the tax exemption:
The bicycle must be used, at least partly, for commuting between home and work.
This often causes confusion.
The rules do not require:
- Exclusive business use
- Detailed mileage logs
- Strict monitoring
Personal and recreational use is permitted, provided commuting remains part of the intended use.
Who Owns the Bicycle?
Another common misconception is that employees automatically own the bicycle.
In reality:
- The employer owns the bicycle during the hire period
- The employee hires it through salary sacrifice
At the end of the arrangement, ownership may be transferred according to HMRC guidance and provider rules.
Most employees ultimately acquire ownership through a modest final payment or extended hire arrangement.
Choosing a Scheme Provider
Another common misconception is that employees automatically own the Several providers dominate the UK market.
Popular options include:
- Cyclescheme
- Halfords Cycle2Work
- Cycle Solutions
Most providers offer:
- Employer registration
- Employee portals
- Retailer networks
- Administration support
For many businesses, setup is free and ongoing administration is minimal.
Is the Cycle to Work Scheme Worth It?
Another common misconception is that employees automatically own the SeFor many employers, the answer is yes.
The scheme offers a rare combination of:
- Tax efficiency
- Employee wellbeing benefits
- Sustainability improvements
- Low administrative burden
Unlike some employee benefits that create additional costs, Cycle to Work arrangements can actually generate payroll savings while improving staff engagement.
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