Cycle to Work Scheme Tax UK 2026/27: Bikes and Salary Sacrifice

The UK Cycle to Work scheme can allow an employer to lend or hire a bicycle and cycling safety equipment without creating a taxable Benefit in Kind. For 2026/27, the important conditions are that the arrangement is available to all employees and the equipment is mainly used for qualifying journeys, especially travel to and from work or between workplaces.

Cycle to Work is a specific salary-sacrifice exception. Most salary-sacrifice benefits have lost their former tax advantage, but qualifying cycles and safety equipment remain within the protected exceptions. That does not mean every bicycle purchase, cash allowance or e-bike arrangement is automatically tax-free: the employer must structure and operate the scheme against the statutory conditions.

What is the Cycle to Work tax exemption?

HMRC says lending or hiring bicycles to employees does not count as a taxable expense or benefit when the equipment is available to all employees and mainly used for getting to work. This is the foundation of a Cycle to Work scheme. The employer does not normally report the qualifying benefit or deduct Income Tax and National Insurance from it.

The arrangement can include a bicycle and cycling safety equipment. The employer may provide the equipment directly or use a scheme provider, but the employer remains responsible for checking that the benefit and salary-sacrifice arrangement meet the conditions.

“Available to all employees” does not require every employee to take a bike. It means the employer should make the scheme available generally rather than limit it to directors, senior staff or a selected department.

What equipment can be included?

Eligible equipment can include a cycle and safety equipment needed for active travel. The employer scheme should identify the items and keep a record of the supplier, agreement, hire period and intended use. Examples of safety equipment can include a helmet, lights, locks, reflective equipment, panniers, mirrors, mudguards and puncture-repair tools where they are connected with safe cycling.

An item marketed as a cycling accessory is not automatically exempt. A phone, general sports clothing, a holiday bike or unrelated personal equipment may need separate analysis. Ask the scheme provider to explain which items are covered and avoid treating a cash-equivalent voucher as the same as a qualifying employer hire arrangement.

Electric bikes and cycles

An electrically assisted pedal cycle can be included when it meets the legal definition and the scheme's active-travel conditions. The employee should check the bike's road-use classification, equipment specification and the employer's scheme terms. A motor vehicle or an item that does not qualify as a cycle is outside the ordinary cycle exemption.

The tax question is separate from road-safety and legal-use rules. The employee must comply with current requirements for using the particular e-bike on UK roads; a payroll label cannot make an ineligible vehicle a tax-exempt cycle.

Salary sacrifice and the employee's saving

In a salary-sacrifice arrangement, the employee gives up part of their contractual salary and the employer provides the cycle hire instead. Because Cycle to Work is one of the protected salary-sacrifice exceptions, a qualifying arrangement can preserve Income Tax and National Insurance advantages.

The saving is not the bicycle's retail price. It depends on the salary given up, the employee's marginal Income Tax rate, National Insurance position, repayment or hire terms and whether the employee remains with the employer. A lower salary can also affect other calculations, so compare the full package rather than assuming a headline percentage saving.

Use the UK Salary Calculator→ to illustrate the marginal tax effect of changing gross salary, but do not treat the output as a quote for a particular Cycle to Work provider.

Cycle to Work versus business mileage

The Cycle to Work scheme provides equipment. It is not the same as claiming mileage for using your own bicycle on business journeys. For 2026/27, HMRC's employer rates list 20 pence per mile for a cycle for tax and National Insurance purposes on business miles.

Ordinary commuting is not business mileage. A journey between home and a permanent workplace is generally commuting, while qualifying travel between workplaces can be business travel. Keep a mileage log showing date, route, purpose and distance if you claim an Approved Mileage Allowance Payment.

What happens when employment ends?

Read the scheme agreement before leaving, changing employer or taking unpaid leave. The employer or scheme provider may require the bike to be returned, may offer a transfer under separate terms, or may continue deductions according to the contract. A final salary deduction or transfer is not automatically tax-free because the original hire qualified.

Tell payroll if your work location, working pattern or use of the bike changes materially. The equipment should continue to be used mainly for qualifying travel while it remains within the employer arrangement.

Is there a £1,000 or £2,000 tax limit?

Do not treat a provider's finance limit as a universal HMRC tax exemption limit. The general exemption page does not set a single statutory voucher ceiling for a qualifying employer loan or hire. A provider may impose a credit limit, require an employer approval threshold or offer different packages, but those commercial conditions are not the same as the tax test. The employer still needs to establish that the equipment is a bicycle or qualifying safety equipment, that the arrangement is available generally and that the mainly-for-work condition is met.

Higher-value electric bicycles can therefore require more careful finance, affordability and road-use checks, but a price alone does not answer the tax question. Conversely, a low-cost bicycle does not qualify automatically if the employer pays cash or makes it available only to selected employees. Keep the provider quote and the employer agreement, but test the statutory conditions independently.

Employer controls and payroll treatment

The employer should retain the scheme policy, employee eligibility rules, equipment list, hire or loan agreement, salary-sacrifice variation, supplier invoice and any return or transfer document. A payroll deduction should agree with the signed salary variation and the period for which the equipment is available. If the employee changes hours, takes unpaid leave or leaves, payroll should stop or adjust deductions according to the contract rather than treating the remaining balance as an automatic tax-free transfer.

The employer does not normally report a qualifying cycle benefit or deduct Income Tax and National Insurance on it. That result depends on the arrangement continuing to meet the exemption. A scheme provider's portal or a payroll code cannot cure a failure of the availability or mainly-for-work conditions. Where an employer has a mixed fleet, include the bike, accessories, e-bike specification, employee offer and approval record in the annual benefits review.

Ownership, transfer and end-of-hire value

The normal Cycle to Work benefit is a loan or hire, not an immediate transfer of ownership. Some agreements allow an employee to return the equipment, continue to use it for a further period or buy it under separate terms. The tax treatment of a later transfer depends on the facts and the value and terms at that time. Do not promise that a nominal final payment automatically transfers the bike without a taxable consequence.

Ask who owns the bicycle during the hire period, whether the employee can use it after the contract ends, how the transfer price is calculated and what happens if the employee leaves early. Keep the agreement and final valuation. A salary-sacrifice saving calculated at the start of the hire should not be presented as the employee's guaranteed final ownership cost.

Commuting, hybrid work and business journeys

The mainly-for-work condition should be reviewed against the employee's actual working pattern. Hybrid working does not necessarily prevent the exemption, but the employer should understand whether the bike is used mainly for journeys to or from work or between workplaces. A bike used almost entirely for leisure while the employee works remotely may create a different fact pattern from a bike used regularly for commuting on the days the employee attends the workplace.

Business mileage is a separate payment question. The 20p-per-mile rate in the 2026/27 employer guidance applies to qualifying business travel on an employee's own cycle; it is not a cash conversion of the Cycle to Work benefit and does not turn ordinary commuting into business mileage. Keep a contemporaneous log and exclude home-to-permanent-workplace journeys.

Employee checklist

Frequently Asked Questions

For other salary-sacrifice arrangements, read Salary Sacrifice Tax Guide 2026/27. For workplace fitness benefits, see Gym Membership Tax UK 2026/27.

Official sources

• GOV.UK: Expenses and benefits — bikes for employees
• HMRC: Travel and subsistence — what is exempt
• GOV.UK: Cycle to Work Scheme employer guidance
• HMRC: Rates and thresholds for employers 2026 to 2027
• HMRC: Income Tax limitation of salary sacrifice