How Does the Cycle to Work Scheme Work?

If you've ever wondered why a colleague arrived at the office looking suspiciously pleased with a brand new bike, there's a good chance the Cycle to Work Scheme was involved.

Introduced by the UK government in 1999 under the Finance Act, the scheme was designed to encourage more people to cycle to work — reducing road congestion, cutting carbon emissions, and improving the health of the country's workforce in the process. More than twenty-five years on, it remains one of the more practical employee benefits on offer, and it's far simpler to understand than most people expect.

The basics: salary sacrifice

At the heart of the Cycle to Work Scheme is salary sacrifice. Rather than buying a bike with money you've already paid income tax and National Insurance on, you agree with your employer to give up a portion of your gross salary — the amount you earn before deductions — in exchange for the use of a new bike.

Because the deduction comes out of your pay before tax is calculated, you make an immediate saving on both income tax and National Insurance contributions. The result is that the bike costs you meaningfully less than the retail price.

Who runs the scheme?

The scheme operates under HMRC guidelines, making it a legitimate, government-backed benefit rather than a tax loophole. Employers who offer it must do so in compliance with HMRC's rules, and certain conditions apply.

Most importantly, the bike must be used for qualifying journeys — cycling to and from your regular place of work, or to a public transport interchange as part of a longer commute. HMRC guidance requires that cycling accounts for at least 50 per cent of the bike's overall use, though in practice this is assessed on good faith.

How does an employer set it up?

The employer — not the employee — purchases or leases the bike from an approved supplier and then loans it to the employee over an agreed hire period. This is typically twelve months, though some providers offer arrangements of up to eighteen months or longer.

During the hire period, the cost of the bike is recovered through monthly deductions from the employee's gross salary. At the end of the agreement, the employee generally has several options: return the bike, enter an extended hire arrangement, or purchase it outright at its fair market value as determined by HMRC guidance.

Some organisations run the scheme entirely in-house; others partner with a specialist provider who handles supplier relationships, employee communications, and administration on the employer's behalf.

How much does an employee actually save?

The saving depends on your tax bracket. For the 2024–25 tax year:

Basic-rate taxpayers (those paying 20% income tax) also save on National Insurance contributions, which stand at 8% for most earnings in 2024–25. The combined saving is approximately 28% of the bike's value.

Higher-rate taxpayers (those paying 40% income tax) pay National Insurance at just 2% on earnings above £50,270, giving a combined saving of approximately 42% — the figure you'll often see quoted by scheme providers.

To put that into context: a higher-rate taxpayer acquiring a £1,000 bike through the scheme would effectively pay around £580 for it. The same principle applies to eligible accessories — helmets, lights, locks, and panniers all qualify under the scheme.

What's in it for the employer?

The scheme isn't only advantageous for the employee. Because salary sacrifice reduces the gross pay on which employer National Insurance is calculated, employers also make a saving — currently at a rate of 13.8%. Many choose to reinvest this back into the scheme, or simply retain it as a cost benefit.

There's also the broader point that a workforce cycling to work tends to be healthier and more energised. Research consistently links regular cycling with lower levels of stress and reduced sickness absence. Cyclists are also far less affected by delays to public transport — which, in a city like London, is a more practical benefit than it might initially appear.

Is there a limit on how much you can spend?

Originally, employers required a consumer credit licence to loan bikes worth more than £1,000. This threshold has since been revised, and many scheme providers now facilitate access to bikes valued at £5,000 or above, including high-specification e-bikes. The limit available to you will depend on the provider your employer uses and the terms of the scheme they've set up.

How CycleCadence fits in

CycleCadence is a London-based Cycle to Work scheme provider operating across four locations in the capital. Employees gain access to a wide range of Giant and Liv bikes — including e-bikes — through a straightforward monthly subscription, with no upfront costs.

For employers, setup is free and CycleCadence handles the administration entirely, making it one of the more straightforward routes into the scheme. If you're an employer looking to offer this benefit to your team, find out more on our Employers page.

For employees curious about what the scheme means in practice — from the bikes available to the monthly cost — our Benefits page sets out everything you need to know.

In summary

The Cycle to Work Scheme is a well-established, government-backed benefit that allows employees to acquire a new bike through salary sacrifice, saving on both income tax and National Insurance in the process. It's straightforward in principle, costs employers very little to set up, and delivers a genuine financial saving to the people who take it up.

Whether you're an employer weighing up whether to add it to your benefits package, or an employee wondering if it's worth the conversation with HR — the answer, in almost every case, is yes.