UK Cycle to Work Scheme (2026/27)
The Cycle to Work scheme is a salary-sacrifice arrangement that lets UK employees buy a bicycle (and safety equipment) through their employer, paying for it from pre-tax salary. Sacrificed pay avoids both Income Tax and employee National Insurance. The 2019 reform abolished the £1,000 cap, so high- end e-bikes and cargo bikes are now in scope.
Tax savings by band (England / Wales / Northern Ireland)
| Tax band | Bike price | Tax + NI saving | Net cost | % saved |
|---|---|---|---|---|
| Basic rate (20% + 8% NI) | £1,000 | £280 | £720 | 28% |
| Basic rate (20% + 8% NI) | £2,500 | £700 | £1,800 | 28% |
| Higher rate (40% + 2% NI) | £2,500 | £1,050 | £1,450 | 42% |
| Higher rate (40% + 2% NI) | £5,000 | £2,100 | £2,900 | 42% |
| Additional rate (45% + 2% NI) | £5,000 | £2,350 | £2,650 | 47% |
Scottish taxpayers - different bands apply
Scotland sets its own Income Tax rates + bands under the Scotland Act 2012 (devolved Scottish rate-setting power since April 2017). National Insurance remains UK-wide. Combined IT + NI saving on cycle-to-work salary sacrifice differs from rUK at most income levels. Check your tax code: "S" prefix (e.g. S1257L) confirms Scottish rate payer.
| Scottish band (2026/27) | Bike price | Tax + NI saving | Net cost | % saved |
|---|---|---|---|---|
| Starter rate (19% + 8% NI) | £1,000 | £270 | £730 | 27% |
| Scottish basic rate (20% + 8% NI) | £1,000 | £280 | £720 | 28% |
| Intermediate rate (21% + 8% NI) | £2,500 | £725 | £1,775 | 29% |
| Higher rate Scotland (42% + 8% NI, sub-UEL) | £2,500 | £1,250 | £1,250 | 50% |
| Higher rate Scotland (42% + 2% NI, above UEL) | £2,500 | £1,100 | £1,400 | 44% |
| Advanced rate (45% + 2% NI) | £5,000 | £2,350 | £2,650 | 47% |
| Top rate Scotland (48% + 2% NI) | £5,000 | £2,500 | £2,500 | 50% |
Best Scottish position: Higher-rate Scotland (42% + 8% NI = 50% sacrifice saving) for income between £43,662 and £50,270 gross - the highest UK sacrifice saving available outside the £100k taper zone. Top-rate Scotland (48% + 2% NI = 50%) reaches the same combined rate above £125,140. Scottish income ranges shown as bike prices reflect typical sacrifice amounts; actual savings scale linearly with the sacrificed amount. Scottish bands per gov.scot Scottish income tax 2026/27.
Frequently asked questions
- How much can I save with Cycle to Work?
- Cycle to Work is a salary sacrifice scheme: the sacrificed amount escapes both Income Tax and employee National Insurance. <strong>rUK (England / Wales / Northern Ireland)</strong>: Basic-rate taxpayers save 28% (20% IT + 8% NI), higher-rate 42%, additional-rate 47%. <strong>Scotland</strong>: Starter 27%, Scottish basic 28%, Intermediate 29%, Higher-rate (42% + 8% NI sub-UEL) 50%, Higher (above UEL) 44%, Advanced 47%, Top rate (48% + 2% NI) 50%. On a £2,500 bike a basic-rate taxpayer saves £700; a Scottish higher-rate payer between £43,662 and £50,270 gross saves £1,250.
- Is there still a £1,000 limit?
- No - the £1,000 cap was abolished by the Office for Tax Simplification reform in June 2019. Schemes can now finance bikes and safety equipment of any value, provided the scheme operates as a regulated consumer hire agreement under the Financial Services and Markets Act. Most schemes now offer bikes up to £3,000-£10,000+ depending on the provider.
- What counts as eligible equipment?
- The bike itself (including e-bikes), plus "safety equipment" which HMRC defines broadly: helmet, lights, locks, reflective clothing, mudguards, panniers / pannier racks, child seats / trailers (for adult transport of children to school etc), repair kits, GPS / cycle computers, mirrors, and clipless pedals. Cyclewear with no safety function (regular sportswear) is not covered.
- Do I have to use it for commuting?
- HMRC requires "qualifying journeys" (commuting to/from work, or between workplaces) to account for at least 50% of the bike's use during the hire period. There is no logging requirement - the employee self-certifies. The bike can be used for leisure rides outside the qualifying-journey window.
- What happens at the end of the hire period?
- Employees typically have three options: (1) extend the hire at a low residual rental for several more years until the bike's HMRC-deemed market value reaches £0, then take ownership free; (2) buy the bike at the HMRC-published Fair Market Value (e.g. 18% of original price after 4 years for a bike under £500, lower for higher-value bikes); (3) return the bike. Option (1) is the standard route used by most major providers because it minimises the eventual transfer cost.
- Are there pitfalls?
- Two main ones: (1) the sacrificed amount reduces gross pay used for some other purposes (mortgage applications, statutory maternity / sick pay, pension contributions on a "qualifying earnings" basis) - usually small effect on a £2-3k bike but worth checking; (2) National Minimum Wage compliance - the post-sacrifice hourly rate must remain at or above the NMW for the employee's age band. Low-paid employees may be ineligible if the sacrifice would drop them below NMW.
- How do Scottish tax bands affect my savings?
- Scotland has 6 Income Tax bands (Starter 19% / Scottish basic 20% / Intermediate 21% / Higher 42% / Advanced 45% / Top 48%) vs rUK's 3 (Basic 20% / Higher 40% / Additional 45%). National Insurance is UK-wide. Combined IT + NI saving on salary sacrifice in Scotland: 27% Starter, 28% Scottish basic, 29% Intermediate, 50% Higher (sub-£50,270 UEL), 44% Higher (above UEL), 47% Advanced, 50% Top. The highest-saving zone for Scots is Higher rate £43,662-£50,270 gross at 50% combined - materially better than the rUK equivalent which is still in basic rate at 28%. Scottish Top rate (48% IT + 2% NI = 50%) above £125,140 also reaches 50%. Welsh + Northern Irish residents use rUK bands. Tax code "S" prefix (e.g. S1257L) confirms Scottish rate payer.