Cycle to Work Scheme

The Cycle to Work Scheme offers a tax-efficient way to obtain a bicycle and associated equipment through salary sacrifice, resulting in savings on tax and National Insurance for employees. Employers also benefit from reduced National Insurance contributions.


Key Points for Employees

  1. Eligibility and Enrollment

    • Employees must be over 16, earning at least the National Minimum Wage after the salary sacrifice deduction.
    • Enrollment is typically done through the employer, who will have a provider or arrangement in place.
  2. Salary Sacrifice Arrangement

    • Employees agree to a salary reduction in exchange for the use of a bicycle and safety equipment.
    • The salary sacrifice must not bring the employee’s gross pay below the National Minimum Wage.
  3. Tax and National Insurance Savings

    • Employees save on Income Tax and National Insurance contributions as the cost of the bicycle is deducted from gross salary.
    • For a basic rate taxpayer, this could mean a saving of up to 32% on the cost of the bike and equipment.
  4. Equipment Covered

    • Bicycles and cycling safety equipment are eligible, including helmets, lights, locks, and reflective gear.
    • The scheme does not cover accessories that are not safety-related, such as cycle clothing.
  5. Ownership and End of Hire Period

    • Initially, the employer technically owns the bicycle.
    • At the end of the hire period (typically 12 to 18 months), employees can usually choose to extend the hire period, purchase the bike at fair market value, or return it.
    • HMRC has set standard fair market values, typically 18% to 25% of the original price after five years.
  6. Using the Bicycle

    • The bicycle should be used primarily for commuting to work and work-related activities, although personal use is allowed.

Key Points for Employers

  1. Setting Up the Scheme

    • Employers can set up the scheme through a third-party provider or administer it in-house.
    • Ensure compliance with HMRC rules on salary sacrifice and National Minimum Wage.
  2. Financial Benefits

    • Employers save on National Insurance contributions on the amount of salary sacrificed by employees.
    • Offering the scheme can improve employee satisfaction and reduce absenteeism due to better health and well-being.
  3. Administration and Compliance

    • Maintain clear records of the salary sacrifice arrangements.
    • Ensure the scheme is available to all employees on an equitable basis.
    • Report the benefits correctly on the annual P11D form or via PAYE Settlement Agreement if applicable.
  4. Asset Management

    • Keep track of the bicycles as assets during the hire period.
    • Handle the transfer of ownership at the end of the hire period according to HMRC’s fair market value guidelines.

Example Calculation for Employees

  • Cost of Bike and Equipment: £1,000
  • Salary Sacrifice Duration: 12 months
  • Monthly Salary Sacrifice: £83.33

Savings Calculation (Basic Rate Taxpayer):

  • Income Tax Saving: £200 (20% of £1,000)
  • National Insurance Saving: £120 (12% of £1,000)
  • Total Saving: £320

Thus, the effective cost of the bike and equipment would be £680 instead of £1,000.


The Cycle to Work Scheme offers significant benefits for both employees and employers, promoting healthier lifestyles and reducing environmental impact. Employees can save on the cost of a bicycle and equipment, while employers benefit from reduced National Insurance contributions and a healthier, more motivated workforce. For specific advice tailored to individual circumstances, consult with Berkeley Accountants or HR representative familiar with HMRC guidelines.

Office hours:

9 am to 6 pm

Monday to Friday



30 Heaton Road


SE15 3NL

Making an appointment

If you have any queries or wish to make an appointment please contact us:

Mobile: +44(0)7578042285



Alternatively, please use our contact form.

Print | Sitemap