Guide

Salary Sacrifice Cycle to Work 2026/27

Written by James Whitfield · Updated August 2026 · Checked against 2026/27 HMRC rates.

The cycle to work scheme lets you get a new bike and cycling equipment through your employer, paying via salary sacrifice over a set period, typically 12 months. Because the repayments come from your gross salary before tax, you pay less income tax and employee NI. For a basic-rate taxpayer a £1,000 bike ends up costing closer to £720 in real terms.

Key takeaways
  • A £1,000 bike costs a basic-rate taxpayer about £720, and a 40% taxpayer about £520.34
  • The bike is exempt from Benefit-in-Kind tax if it's used mainly for commuting.1
  • There's no fixed £1,000 cap any more — most schemes go higher, but check yours.1
  • Budget for the small end-of-scheme ownership transfer fee — it's part of the real cost.
  • Sacrifice can't drop your cash pay below minimum wage, and it reduces your contractual salary.

How cycle to work salary sacrifice works

Your employer buys the bike and equipment on your behalf. You sacrifice a portion of salary each month to cover the cost, spread over the scheme period. At the end, ownership typically transfers to you for a small market-value payment.

The saving arises because:

  • Your taxable salary is reduced by the sacrificed amount.
  • You pay less income tax at your marginal rate (20%, 40% or 45%).
  • You pay less employee NI — 8% on earnings between £12,570 and £50,270, or 2% above £50,270.

The bike is technically a benefit in kind, but HMRC grants an exemption for bikes used mainly for qualifying journeys.1 No BIK tax applies if you use the bike for commuting.

Worked example: £1,000 bike, basic-rate taxpayer on £40,000

Buy the bike privately and it costs £1,000 of post-tax money. Through the scheme, you sacrifice £1,000 of gross salary over 12 months instead:

Gross salary sacrificed for the bike£1,000
Income tax saved — 20%4−£200
Employee NI saved — 8%3−£80
Effective cost of a £1,000 bike£720

A 40% taxpayer saves £400 tax + £80 NI on the same bike — an effective cost of about £520. Add the small end-of-scheme transfer payment; schemes vary.

Scheme rules and limitations

Qualifying use

HMRC requires the bike to be used mainly for qualifying journeys — commuting to work or travel between workplaces. You don't have to cycle every day, but if the bike is predominantly for leisure the tax exemption does not apply and BIK tax could be due.

Bike value cap

Most cycle to work providers previously operated under a Consumer Credit Act exemption that capped scheme values at £1,000. HMRC has since given employers flexibility to go above this if they operate as a creditor under the Consumer Credit Act. Many schemes now offer higher limits. But check your employer's specific scheme — the cap varies.

Ownership transfer

At the end of the scheme period, the bike does not automatically become yours. The most common arrangement is a market-value purchase — typically a small percentage of the original cost. Some schemes use a further hire period instead. Your scheme agreement sets this out.

National Minimum Wage

Salary sacrifice must not reduce your cash pay below the National Minimum Wage. If you earn close to NMW, your employer may be unable to process the full sacrifice. See the salary sacrifice and minimum wage guide for detail.

Common mistakes

  • Ignoring the ownership transfer cost. The small end-of-scheme fee is real — budget for it.
  • Not checking the scheme limit. Some employer schemes are still capped at £1,000. Buying above the limit defeats the tax advantage on the excess.
  • Assuming any use qualifies. If the bike is mainly used for leisure, BIK tax may be due.
  • Forgetting the effect on other salary-linked benefits. Like all salary sacrifice, this reduces your contractual salary, which can affect mortgage assessments and salary-linked benefits.
Try the calculator

Use our salary sacrifice calculator to see your income tax and NI saving for any sacrifice amount, including cycle to work.

Open the calculator →

Frequently asked questions

Is there a limit on the bike value in a cycle to work scheme?

It depends on your employer's scheme. Historically a £1,000 Consumer Credit Act exemption applied, but employers can now go above this under FCA regulation. Many providers offer schemes up to £5,000 or more. Check your employer's specific scheme documentation for the current limit.

Do I have to use the bike for commuting?

HMRC requires the bike to be used mainly for qualifying journeys (commuting or travel between workplaces). There is no requirement to cycle every day, but if the bike is primarily used for leisure the tax exemption may not apply and Benefit in Kind tax could be due.

What happens at the end of the scheme period?

Most schemes involve a small ownership transfer payment — typically a percentage of the original cost — after which the bike is yours. Some schemes use an extended hire arrangement instead. Your scheme agreement will detail the exact process.

Can I include cycling accessories in the scheme?

Yes. Safety equipment such as helmets, lights, locks and high-visibility clothing can be included alongside the bike, up to your scheme's value limit. General sportswear or non-cycling items do not qualify.

What if I leave my job before the scheme ends?

Your employer will typically require any outstanding balance to be settled — often as a deduction from your final pay. Check the early exit terms in your scheme agreement before signing up.

This guide is for general information only. It does not constitute financial, tax or legal advice. Always check your employer's scheme documentation and current GOV.UK guidance before making decisions.

Sources & references

Every headline figure in this guide is checked against the official HMRC and GOV.UK pages below and reflects the confirmed 2026/27 tax year. Each link opens the relevant official page in a new tab.

  1. Expenses and benefits: bikes for employees ↗ https://www.gov.uk/expenses-and-benefits-bikes-for-employees
  2. Salary sacrifice and the effects on PAYE (HMRC) ↗ https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye
  3. National Insurance rates and categories ↗ https://www.gov.uk/national-insurance-rates-letters
  4. Income Tax rates and Personal Allowances ↗ https://www.gov.uk/income-tax-rates
Verified against published UK government guidance.