National Bike Week returns once again from 8 – 14 June 2026 and celebrates the power of pedalling across the UK.
If your business has been meaning to look at the Cycle to Work scheme, then perhaps next week is the nudge you needed.
The Cycle to Work scheme is one of those staff benefits that can help employers to reduce their payroll tax bill, whilst also ticking the boxes for improving employee health and wellbeing, as well as their eco credentials.
Whilst it may sound complex at first, the whole thing runs through your existing payroll with very little ongoing administration.
Yet take-up remains far lower than it should be, largely because many businesses have never got round to setting it up.
Cycle to Work is a Government-backed salary sacrifice scheme. Your business purchases a bicycle and cycling equipment on the employee’s behalf and the employee repays the cost through monthly salary deductions.
Employees can use the scheme for a broad range of cycling equipment, not just the bike itself. Eligible items include:
GPS units, cycling cameras and car-mounted bike racks fall outside the eligible categories, so it is worth pointing this out to employees when you launch the scheme to avoid any disappointment.
Deductions for the scheme come out of gross pay, before Income Tax and National Insurance are calculated, which is where the saving comes from.
The size of the saving depends on the employee’s tax rate, but a basic rate taxpayers typically save between 30 – 39 per cent of the equipment cost, while higher rate taxpayers typically save between 40 – 47 per cent.
This means that on a £1,500 e-bike, a higher-rate taxpayer could end up paying less than £800, whilst enjoying no upfront cost and no interest, with repayments spread over 12 to 18 months.
Salary sacrifice reduces the gross salary figure on which employer National Insurance Contributions are calculated. That saving sits at approximately 15 per cent of the sacrificed amount.
The scheme is straightforward to administer, but there are two areas worth checking before you launch.
First, salary sacrifice cannot reduce an employee’s earnings below the National Living Wage or National Minimum Wage.
Second, the Benefit in Kind exemption that makes the scheme tax-efficient requires that the bicycle is used at least partly for commuting between home and a workplace. Purely recreational use does not qualify. In practice, HMRC does not require journey logs and mixed use is perfectly acceptable, but the commuting element needs to exist.
One aspect of the scheme that sometimes causes confusion is ownership. Throughout the hire period, the bicycle technically belongs to your business, not the employee.
At the end of the arrangement, the employee can transfer ownership by paying a small fair market value fee as determined by HMRC or by extending the hire period.
Your scheme provider will handle this process and guide both parties through the options.
The most widely used scheme providers are Cyclescheme, Halfords Cycle2Work and Cycle Solutions.
Each operates a network of partnered retailers, and the process for employees is similar across all three: they choose their equipment, submit a request, receive a certificate or voucher once it has been approved and exchange it at a partnered retailer. Registration for employers is typically free.
If you are unsure which provider best suits your business size and payroll setup, it is worth taking a few minutes to compare them before committing.
If you would like to introduce the scheme or review how your existing arrangement is structured, you should ensure you seek guidance on your payroll procedures.
The tax and payroll mechanics are not complicated, but getting the salary sacrifice documentation right from the outset saves time and avoids problems further down the line. Get in touch to find out how we can help you with your salary sacrifice requirements.
Jim Botton – Pleasure Beach (Skegness)
