Cycling to work isn’t just good for your employees’ health – it’s one of the most straightforward, cost-effective salary sacrifice schemes available to UK employers. Cycle to Work salary sacrifice enables employees to lease a bicycle and cycling equipment through their gross pay, spreading the cost while saving on Income Tax and National Insurance. For employers, it generates meaningful NI savings and supports wider sustainability goals at virtually no cost to run.
This guide explains how Cycle to Work salary sacrifice works, outlines the tax implications, covers key compliance considerations, and explores how UK employers can implement it as part of a modern reward strategy.
Table of contents
What is Cycle to Work salary sacrifice?
The Cycle to Work scheme is a government-backed initiative that allows employees to access a bike and cycling equipment through a salary sacrifice arrangement. Rather than purchasing the bike outright from their net pay, the employee sacrifices a portion of their gross salary over an agreed term – typically 12 to 18 months – in exchange for use of the equipment.
Because the sacrifice is taken from gross pay, the employee saves Income Tax and National Insurance on the full cost of the equipment. The employer also benefits from reduced Employer NI contributions.
Importantly, Cycle to Work sits on the government’s approved list of salary sacrifice benefits that are exempt from Benefit in Kind (BiK) tax. This means both employers and employees make genuine savings – not just the employee – which distinguishes it from less tax-efficient salary sacrifice arrangements.
How does Cycle to Work salary sacrifice work?
A typical UK employer process follows these steps:
- The employer partners with a Cycle to Work provider: The employer registers with an approved scheme provider, who facilitates equipment selection, leasing, and administration. There are over 2,600 participating retailers across the UK.
- The employee selects a bike and equipment: Employees browse and choose from a wide range of bikes and accessories – including helmets, locks, and lights – up to an agreed value.
- A salary sacrifice agreement is put in place: The employee agrees to a contract variation, reducing their gross salary by the cost of the equipment spread over the lease term.
- Tax and NI are calculated on the reduced salary: Because gross pay is lower, both the employee and employer pay less National Insurance. The employee also pays less Income Tax.
- The employee uses the bike primarily for commuting: HMRC requires that the bike is used at least partly for qualifying journeys – commuting to a permanent or temporary workplace. It can also be used for leisure.
- End of agreement: At the end of the lease, the employee typically has the option to purchase the bike at a fair market value, extend the hire period, or return the equipment.
What are the benefits of Cycle to Work for employees?
1. Significant Tax and NI savings
Much like other popular schemes like pension exchange, because the sacrifice is made from gross pay, employees save on both Income Tax and National Insurance contributions for 2025/26:
- A basic rate taxpayer saves 28% of the total cost (20% Income Tax + 8% NI).
- A higher rate taxpayer saves 42% (40% Income Tax + 2% NI).
- An additional rate taxpayer saves 47% (45% Income Tax + 2% NI).
As a practical example, a basic rate taxpayer spending £1,000 on a bike and equipment would save £280 – effectively paying only £720, spread across monthly payroll deductions. For a higher rate taxpayer choosing a £2,500 e-bike, the saving rises to £1,050.
2. Affordable access to a quality bike
Spreading the cost across 12-18 months with no credit check required makes higher-quality bikes and equipment accessible to employees who might otherwise struggle to afford them upfront. This is particularly relevant given the rising cost of commuting.
3. Health and wellbeing benefits
Regular cycling is associated with improved cardiovascular health, reduced stress, and better mental wellbeing. Employees who cycle to work report higher energy levels and lower rates of absenteeism – benefits that have a measurable positive impact on workforce performance over time.
4. Environmental benefits
Switching from car or public transport to cycling reduces an employee’s carbon footprint. For employees who care about their environmental impact, this is a meaningful, tangible perk – and one that aligns with broader societal expectations around sustainability.
What are the benefits of Cycle to Work for employers?
1. Employer National Insurance savings
With Employer NI at 15% for 2025/26, every time an employee participates in Cycle to Work, your NI liability reduces. Employers save 15% of the total sacrificed amount through reduced NI contributions.
For every £1,000 of equipment, the employer saves £150. Across a workforce with meaningful scheme uptake, these savings can be reinvested into other employee benefits or general business needs. The scheme is cost-neutral – or cost-positive – to run.
2. Supports sustainability and ESG goals
Many organisations have made formal commitments to reduce their environmental footprint. Offering Cycle to Work is a practical, credible step toward lowering commuting-related emissions. It demonstrates corporate responsibility in a way that resonates with employees, external stakeholders, and increasingly, investors and clients who assess ESG credentials.
3. A low-cost, high-perceived-value benefit
Unlike many employee benefits, Cycle to Work is largely self-funding. Administration is managed by the scheme provider, and the employer’s NI savings typically offset any residual costs. Yet for employees – particularly regular commuters – it is a highly visible, valued perk that they actively use.
4. Supports recruitment and retention
In a competitive hiring landscape, a strong benefits package can be the deciding factor for candidates. Cycle to Work schemes are popular, well-understood, and consistently cited positively by employees when reviewing their employer’s benefits offering.
5. Reduced parking pressure and commuting costs
Encouraging cycling to work can reduce demand for limited (and often expensive) parking facilities. For employers in urban areas, this is an underrated practical benefit.
Key compliance considerations
National Minimum Wage
A salary sacrifice arrangement must not reduce an employee’s hourly rate below the National Minimum Wage (£12.71/hour from April 2026). Employers should run eligibility checks during the sign-up window to ensure lower-paid employees do not inadvertently breach these limits. Scheme providers typically include automated NMW checks as part of their administration process.
Primarily for commuting
HMRC requires that the bike is used at least partly for qualifying journeys – typically commuting to a permanent or temporary workplace. The scheme cannot be justified for purely leisure use, though in practice HMRC does not require commuting to be the sole use of the bike.
Employer ownership during the agreement
During the lease period, the employer – not the employee – owns the bike. Correct documentation of the hire agreement is therefore essential for HMRC compliance.
Impact on other benefits
Because Cycle to Work reduces gross pay, it can have a knock-on effect on earnings-linked entitlements, including statutory pay such as maternity or paternity pay, and life assurance multiples. Employers should communicate these implications clearly to employees before they enrol.
Cycle to Work FAQs
Is there a value cap on equipment?
There is no fixed upper limit on the value of equipment that can be accessed through a Cycle to Work scheme. With most providers, employees can add their own cap. However, for agreements above £1,000, the employer may be required to hold a Consumer Credit licence, or work through an approved provider that already holds one – which most established scheme providers do as standard.
For higher-value orders, affordability checks may also apply to ensure the monthly sacrifice does not take the employee below National Minimum Wage.
Who owns the bike during the agreement?
The employer owns the bike throughout the hire period. At the end of the agreement, the employee typically has three options: purchase the bike at its fair market value, extend the hire arrangement, or return the equipment. Some providers offer an extended ownership period where the employee hires the bike for a small nominal fee until the value becomes negligible, after which ownership can transfer for free or a minimal sum.
Are e-bikes eligible?
Yes. Electric bikes (e-bikes) are fully eligible for Cycle to Work, provided they meet HMRC’s definition of an electrically assisted pedal cycle (EAPC): a motor of 250 watts or less, pedal assistance that cuts out at 15.5 mph, and functional pedals. E-bikes that exceed these specifications are classified as mopeds and are not eligible.
Does Cycle to Work affect mortgage applications?
Salary sacrifice reduces gross pay for the duration of the scheme, which some mortgage lenders may factor into affordability assessments. Most lenders are familiar with salary sacrifice and will either assess affordability on take-home pay – which is higher under the scheme due to tax savings – or on the pre-sacrifice salary, which can be evidenced with a letter from the employer if needed. Employees planning to apply for a mortgage during the scheme period should check with a mortgage broker in advance.
Who is Cycle to Work salary sacrifice suitable for?
Cycle to Work works well for:
- UK SMEs and large employers
- Office-based, hybrid, and field-based workforces where commuting is involved
- Employers looking to complement existing salary sacrifice schemes
- Employees across all income levels, with the greatest savings available to higher-rate taxpayers
It is less suitable for employees earning close to National Minimum Wage, as salary sacrifice cannot reduce pay below statutory thresholds.
How Maji supports Cycle to Work salary sacrifice
Cycle to Work decisions sit alongside a range of other salary sacrifice choices employees may be weighing – from pension contributions and electric vehicles to workplace nursery and holiday exchange. Making the right choices across all of these schemes requires a clear view of the combined financial impact.
Maji supports employers by:
- Providing a clear digital platform for employee engagement
- Helping employees understand the financial impact of Cycle to Work alongside their other salary sacrifice choices
- Supporting HR teams with simple, compliant administration
- Embedding Cycle to Work within a wider financial wellbeing and benefits strategy
This ensures employees don’t just access the benefit – they understand how to use it effectively as part of their overall financial picture.
Should your organisation offer Cycle to Work?
If you want to:
- Reduce your Employer NI bill in 2025/26
- Support employee health, wellbeing, and sustainability goals
- Offer a flexible, modern benefit that is largely cost-neutral to provide
- Strengthen your benefits package without increasing base salary spend
Cycle to Work is one of the simplest and most popular salary sacrifice schemes available – and one of the easiest to implement.
Explore salary sacrifice options with Maji
Cycle to Work is just one part of a broader salary sacrifice and financial wellbeing strategy.
Maji has one of the most extensive salary sacrifice offers in the UK. You can see them all here.
If you’re interested in learning how Cycle to Work can support your employee benefits strategy, get in contact with our team today.
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