UK Cycle to Work Scheme Walkthrough 2026/27
UK Cycle to Work scheme 2026/27 - salary sacrifice mechanics, tax and NI saving from 28%, eligibility, e-bikes, Scottish bands and HMRC end-of-hire values.
The 6-step process
- Check your employer offers a cycle to work scheme
- Choose a cycle and safety equipment from the scheme's retailers
- Get a voucher or quote from the scheme provider
- Sign the hire and salary sacrifice agreement with your employer
- Salary is sacrificed each month for the hire period (DfT: typically 12 or 18 months)
- End of hire: buy at market value, continue the hire or return the cycle, as your scheme allows
Tax savings by income band (England / Wales / Northern Ireland)
| Income band | IT + NI saving | £1,500 bike net cost |
|---|---|---|
| Basic rate (20% IT + 8% NI) | 28% | £1,080 |
| Higher rate (40% IT + 2% NI above the £50,270 UEL) | 42% | £870 |
| £100,000 taper zone (60% effective IT + 2% NI) | 62% | £570 |
| Additional rate (45% IT + 2% NI) | 47% | £795 |
Tax savings for Scottish taxpayers (different bands apply)
The Scottish Parliament sets Scottish Income Tax rates and bands under section 80C of the Scotland Act 1998, as amended by section 13 of the Scotland Act 2016. National Insurance remains UK-wide. Combined IT + NI saving on cycle-to-work salary sacrifice in Scotland differs from the rest of the UK at most income levels:
| Scottish band (2026/27) | Taxable income range | IT + NI saving | £1,500 bike net |
|---|---|---|---|
| Starter rate (19% + 8% NI) | £0-£3,967 | 27% | £1,095 |
| Scottish basic rate (20% + 8% NI) | £3,967-£16,956 | 28% | £1,080 |
| Intermediate rate (21% + 8% NI) | £16,956-£31,092 | 29% | £1,065 |
| Higher rate (42% + 8% NI, below UEL) | £31,092-£37,700 | 50% | £750 |
| Higher rate (42% + 2% NI, above UEL) | £37,700-£62,430 | 44% | £840 |
| Advanced rate (45% + 2% NI) | £62,430-£125,140 | 47% | £795 |
| Top rate (48% + 2% NI) | £125,140+ | 50% | £750 |
Income ranges are taxable income (after the £12,570 Personal Allowance); the Upper Earnings Limit of £50,270 falls at £37,700 of taxable income. Outside the £100,000 Personal Allowance taper, the 50% saving in the higher rate below the UEL is the largest available, which puts Scottish higher-rate earners between £43,662 and £50,270 in the best position; Scottish top-rate payers also reach 50%. Inside the taper zone the advanced rate gives 45% × 1.5 + 2% NI = 69.5%.
Whether you are a Scottish taxpayer depends on where you live (Scotland Act 1998 s.80D). A tax code starting with "S" (for example S1257L) shows HMRC is treating you as one. Welsh and Northern Irish residents use the rest-of-UK bands in the first table.
Examples of scheme providers
- Cyclescheme
- Green Commute Initiative
- Bike2Work Scheme
- Cycle Solutions
Where a third-party provider owns the cycle, it needs FCA authorisation for the hire agreement (DfT guidance, para 5.5). Limits, hire periods and end-of-hire terms vary by provider and employer.
End-of-hire values HMRC accepts (EIM21667A)
| Age of cycle | Original price under £500 | Original price £500+ |
|---|---|---|
| 1 year | 18% | 25% |
| 18 months | 16% | 21% |
| 2 years | 13% | 17% |
| 3 years | 8% | 12% |
| 4 years | 3% | 7% |
| 5 years | Negligible | 2% |
| 6 years and over | Negligible | Negligible |
Values are a percentage of the original price. Paying at least this value means no employment income charge; the table cannot be used for cycles with special value, such as antique or custom-built cycles.
End-of-hire example
- A £1,500 cycle on a 12-month salary sacrifice, for a higher-rate taxpayer outside Scotland: net cost after the 42% saving is £870
- If the scheme lets you keep the cycle on hire after the sacrifice ends (check the terms), it is 4 years old after a further 3 years
- HMRC's table value for a 4-year-old cycle that cost £500 or more is 7%: £105
- Total cost: £870 + £105 = £975 for a £1,500 cycle
Related pages
Frequently asked questions
How much can I save on a cycle to work bike?
It depends on your Income Tax band and whether you pay Scottish Income Tax. England, Wales and Northern Ireland 2026/27: basic rate 28% (20% IT + 8% NI); higher rate 42%; £100,000 taper zone 62%; additional rate 47%. Scotland: starter 27%; Scottish basic 28%; intermediate 29%; higher rate below the Upper Earnings Limit 50%; higher rate above it 44%; advanced 47%; top rate 50%. Outside the taper zone the largest saving is 50%, for Scottish higher-rate payers earning between £43,662 and £50,270, and for Scottish top-rate payers. The NI part only applies to pay above the Primary Threshold, and a sacrifice must not take your pay below the National Minimum Wage (DfT guidance, Annex B).
Do Scottish tax bands change cycle-to-work savings?
Yes. Scotland has six bands (starter 19%, basic 20%, intermediate 21%, higher 42%, advanced 45%, top 48%) against three elsewhere (20%, 40%, 45%); National Insurance is UK-wide. A Scottish taxpayer on £45,000 pays the Scottish higher rate and saves 50% of each £1 sacrificed, against 28% for someone on £45,000 elsewhere, who is still a basic-rate payer. The Scottish advanced rate starts at £75,000 of income (£62,430 taxable), while the additional rate elsewhere starts at £125,140. Whether you are a Scottish taxpayer depends on where you live (Scotland Act 1998 s.80D); a tax code starting with S shows HMRC is treating you as one.
What's the eligibility?
You must be an employee of an employer that runs a scheme. For the tax exemption (ITEPA 2003 s.244, HMRC EIM21664) the offer must be available generally to all employees, and the cycle must be used mainly for qualifying journeys: travel between home and a workplace, or between workplaces. HMRC accepts the test is met unless there is clear evidence that less than half the use is on qualifying journeys. The self-employed cannot use it, because it is an exemption for employment benefits.
Is there a maximum bike cost?
For tax and National Insurance there is no limit on the value of the cycle and safety equipment (DfT Cycle to Work guidance, June 2019, para 4.7). The £1,000 figure is a consumer-credit rule: an employer hiring goods worth up to £1,000 directly to its employees does not need Financial Conduct Authority authorisation, but above £1,000, or where a third-party scheme provider is the owner, FCA authorisation is needed (paras 5.4-5.5). Employers can set their own limit for their scheme.
How does the salary sacrifice work?
The employer, or a scheme provider, buys the cycle and hires it to you. You give up an agreed amount of gross salary over the hire period, which DfT says typically runs for 12 or 18 months. Because your salary is lower you pay less Income Tax and employee NI, and the loan of the cycle is exempt under s.244. The agreement must not build in an automatic transfer of ownership at the end, or the exemption is lost (EIM21667).
What can I buy with cycle to work?
A cycle, including an electrically assisted pedal cycle, and cyclists' safety equipment. DfT's list (Annex A) includes helmets to BS EN 1078, bells and horns, lights including dynamo packs, mirrors and mudguards, cycle clips and dress guards, panniers and luggage carriers, child safety seats, locks and chains, pumps and repair kits, replacement parts, disability adaptations, and reflective clothing. HMRC gives cycle computers, non-reflective waterproof clothing and cycle training as examples of items that do not count (EIM21664).
What happens at end of hire?
Your scheme terms decide the options, typically buying the cycle, continuing the hire, or returning it. If you pay at least market value there is no tax charge; if you pay less, the difference is taxable (EIM21667A). HMRC accepts the values in its simplified table: for a cycle originally £500 or more, 25% of the original price at 1 year, 21% at 18 months, 17% at 2 years, 12% at 3 years, 7% at 4 years and 2% at 5 years; for a cycle under £500, 18%, 16%, 13%, 8% and 3%, negligible from 5 years.
Can I use cycle to work if I work from home?
The cycle must be used mainly for qualifying journeys. A COVID-19 easement suspended that test only for cycles provided on or before 20 December 2020, and only until 5 April 2022 (EIM21664). Someone who works entirely from home makes few qualifying journeys, so is unlikely to meet the test. Ask your employer before joining.
Can I have multiple cycle-to-work bikes?
The exemption covers a cycle lent to you and used mainly for your qualifying journeys (EIM21664). Occasional use by your family does not break it, but a cycle mainly ridden by your spouse or partner fails the main-use test. How many cycles you can have, and whether you can sell or transfer one during the hire, depends on your scheme's terms.
What about e-bike vs regular bike?
Electrically assisted pedal cycles are covered by the exemption (EIM21664), with the same salary sacrifice mechanics. A £3,000 e-bike for a higher-rate taxpayer outside Scotland saves 42%: £1,260 of tax and NI, so the net cost is £1,740, before any end-of-hire purchase. A package over £1,000 needs an FCA-authorised owner (DfT guidance, paras 5.4-5.5).