The cycle to work scheme remains a popular employee benefit, and it is easy to see why. Despite speculation ahead of the November 2025 Budget, no financial cap was introduced on the value of cycles that can be provided under the scheme. That matters because some cycles can cost more than £5,000, and the tax savings can still be significant.
How the cycle to work scheme usually works
In a typical arrangement, an employer registers with a cycle to work scheme provider, buys the cycle, and then hires it to the employee. In many cases, this is done through a salary sacrifice arrangement. The hire period will usually last between 12 and 18 months.
The employee then repays the cost through gross monthly salary deductions. Because those deductions are made before tax, both the employee and the employer can save money.
For example, if the monthly salary deduction is £400, an employee paying tax at the higher rate could save around £160 in tax each month, plus a small amount of National Insurance contributions. At the same time, the employer could save £60 a month in NICs.
Conditions employers should be aware of
There are still rules that need to be met.
The cycle to work scheme must be offered across the whole workforce, although that does not necessarily mean salary sacrifice has to be used in every case.
At least 50% of the cycle’s use must also be for qualifying journeys. In most cases, that means the employee’s commute to work.
What happens at the end of the hire period
Once the hire period ends, the employee has a few options. The cycle can be returned to the provider, or the hire agreement can be extended for a nominal payment.
There is also a third route that many employees may prefer. They can take immediate ownership by paying a fair market value to the employer.
For a cycle that is one year old and originally cost more than £500, HMRC will accept a disposal value of 25% of the original price. A lower percentage applies where the cycle is older or where it cost less than £500.
Why the cycle to work scheme is still worth considering
For employers, the scheme remains a practical way to offer a valued benefit while also making NIC savings. For employees, it can make cycling more affordable by spreading the cost and reducing the tax paid along the way.
Although the detail can be easy to overlook, the popularity of the cycle to work scheme is not surprising. The savings remain attractive, and no value cap has been introduced. Detailed guidance for employers is available from HMRC, although it is worth noting that the NIC rates in that guidance are now out of date.