Salary Sacrifice Cycle to Work 2026/27

Published by the UK Money Calculators editorial team. Last updated for the 2026/27 tax year.

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.

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. No BIK tax applies if you use the bike for commuting.

Worked example

£1,000 bike, basic-rate taxpayer on £40,000

Without cycle to work scheme:

• You buy the bike from post-tax income. Cost: £1,000

With cycle to work (salary sacrifice over 12 months):

• Gross salary sacrifice: £1,000
• Income tax saving (20%): £200
• Employee NI saving (8%): £80
• Total saving: £280
• Effective net cost: £720 (versus £1,000 paid privately)

A higher-rate taxpayer on the same £1,000 sacrifice would save £400 income tax plus £80 NI (if in the 8% band). Effective cost around £520.

Add the small transfer-of-ownership payment at the end and these are the typical figures, though 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.

Frequently asked questions

Official sources

• GOV.UK — Salary sacrifice and the effects on PAYE
• GOV.UK — National Insurance rates and letters

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.