UK Cycle to Work Scheme (2026/27)
UK Cycle to Work scheme 2026/27 - hire a bike and safety kit through salary sacrifice. Saves 28% (basic rate) to 47% (additional rate) of the cost.
The Cycle to Work scheme lets UK employees hire a bicycle and cyclist's safety equipment from their employer, usually in return for a salary sacrifice. The benefit is exempt from tax under ITEPA 2003 s.244 if the cycle is used mainly for journeys to and from work and the offer is open to the whole workforce. Sacrificed pay avoids both Income Tax and employee National Insurance. DfT guidance (June 2019) confirms there is no value limit for tax purposes; hire agreements over £1,000 need an employer or provider with Financial Conduct Authority authorisation (per DfT guidance).
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% |
Higher and additional rate rows assume earnings above the £50,270 NI Upper Earnings Limit, where employee NI is 2%. The sacrifice must not take pay below the National Minimum Wage.
Scottish taxpayers - different bands apply
The Scottish Parliament sets Income Tax rates and bands for Scottish taxpayers; National Insurance remains UK-wide. The combined Income Tax and NI saving therefore differs from the rest of the UK at most income levels. A tax code starting with S shows you are taxed as a Scottish taxpayer.
| 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, below 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% |
The Scottish higher rate band below the NI Upper Earnings Limit (gross pay from £43,662 to £50,270) gives a combined 50% saving, the highest outside the £100,000 Personal Allowance taper. The top rate (above £125,140, where the Personal Allowance has been fully withdrawn) gives 50%. Savings scale with the amount sacrificed. Scottish bands per gov.scot Scottish Income Tax rates and bands 2026/27.
Related
Frequently asked questions
How much can I save with Cycle to Work?
Cycle to Work is usually run through salary sacrifice, so the sacrificed pay escapes both Income Tax and employee National Insurance. England, Wales and Northern Ireland: basic rate taxpayers save 28% (20% Income Tax + 8% NI), higher rate 42%, additional rate 47%. Scotland: starter 27%, Scottish basic 28%, intermediate 29%, higher rate below the NI Upper Earnings Limit 50%, higher rate above it 44%, advanced 47%, top 50%. On a £2,500 bike a basic rate taxpayer saves £700; a Scottish higher rate taxpayer earning between £43,662 and £50,270 saves £1,250.
Is there still a £1,000 limit?
Not for tax. Department for Transport guidance (updated June 2019) says there is no limit on the value of the cycle and safety equipment for tax and National Insurance purposes. The £1,000 figure is a regulatory one: an employer relying on the consumer hire exemption without Financial Conduct Authority authorisation is limited to hire agreements of £1,000 or less. Schemes above £1,000 are acceptable where the employer, or a third-party scheme provider, has the required FCA authorisation.
What counts as eligible equipment?
A cycle (including an electrically assisted pedal cycle) and cyclist's safety equipment. Safety equipment is not defined in law; DfT guidance says it could include helmets meeting BSEN1078, bells, lights, mirrors and mudguards, cycle clips and dress guards, panniers and luggage carriers, child safety seats, locks and chains, pumps and repair kits, replacement parts, adaptations for disability, and reflective clothing.
Do I have to use it for commuting?
The tax exemption in ITEPA 2003 s.244 requires the cycle to be used mainly for qualifying journeys - journeys to or from work, or between workplaces. DfT guidance states this as at least 50% of the use. The scheme must also be offered across the whole workforce, and you must not own the cycle during the hire period.
What happens at the end of the hire period?
DfT guidance gives three options: extend the hire agreement, return the cycle and equipment, or buy them under a separate agreement made at the time. There must be no option to buy built into the original hire agreement. If you buy, paying at least market value avoids a tax charge; HMRC accepts a simplified valuation table (EIM21667A) - for a cycle that cost £500 or more, 25% of the original price after 1 year, 17% after 2 years, 7% after 4 years and 2% after 5 years. A cycle given to you free is a taxable benefit.
Are there pitfalls?
Two main ones: (1) salary sacrifice lowers your contractual pay, which can affect earnings-related amounts such as some pension contributions and statutory payments, and how lenders see your income; (2) the sacrifice must not take your pay below the National Minimum Wage or National Living Wage. DfT guidance suggests a lower-value package, a longer hire period, or a hire without salary sacrifice where that would happen.
How do Scottish tax bands affect my savings?
Scotland has six Income Tax bands for 2026/27 (starter 19%, basic 20%, intermediate 21%, higher 42%, advanced 45%, top 48%) against three in the rest of the UK; National Insurance is UK-wide. The largest Scottish saving below the Personal Allowance taper is in the higher rate band below the £50,270 Upper Earnings Limit (from £43,662), at 50%, where a taxpayer elsewhere in the UK would still be a basic rate taxpayer saving 28%. A tax code starting with S shows you are taxed as a Scottish taxpayer.