A Practical Look at the Cycle to Work Scheme for Employers

With rising costs continuing to impact both businesses and employees, many employers are exploring ways to offer meaningful benefits in a tax-efficient way. One option that continues to grow in popularity is the Cycle to Work scheme.

What is the Cycle to Work Scheme?

The Cycle to Work scheme allows employers to provide bicycles and safety equipment to employees as a tax-free benefit. In most cases, this is structured through a salary sacrifice arrangement, where employees give up a portion of their gross salary in exchange for the use of a bike.

Because the sacrifice is made before tax and National Insurance, both the employee and employer can make savings:

• Employees reduce their income tax and NIC

• Employers reduce their employer NIC liability

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How the scheme works in practice

There are a few ways businesses can operate a Cycle to Work scheme:

• Loan arrangement - The employer purchases the bike and loans it to the employee

• Voucher scheme - Employees receive a voucher to hire equipment from a supplier

• Pool bikes - Shared bikes made available for general employee use
  

At the end of the hire period, employees can usually choose to continue hiring, return the bike, or purchase it at a fair market value based on HMRC guidance.

Key conditions to be aware of

To ensure the scheme remains compliant:

• The employee must not own the bike during the hire period

• The bike must be used mainly (more than 50%) for commuting or work journeys

• The scheme must be offered to all employees
  

These conditions are important to maintain the tax advantages of the scheme.

Practical considerations for employers

Most businesses choose to work with a third-party provider to manage the administration, although it can also be run internally.

A few additional points to consider:

• HMRC does not require employers to monitor how much the bike is used privately

• Employees are not expected to keep detailed usage logs

• VAT may be reclaimable on bikes and equipment (subject to normal VAT rules)

• Care is needed when using salary sacrifice to ensure the scheme remains accessible to all employees
  

Why consider Cycle to Work?

Beyond the tax savings, the scheme can also support wider business goals:

• Enhancing employee benefits packages

• Supporting staff wellbeing and sustainability initiatives

• Improving recruitment and retention
  

For many businesses, it’s a relatively simple way to add value without significantly increasing costs.

In summary

The Cycle to Work scheme remains a practical and tax-efficient option for employers looking to support their team while managing costs.

If you’re considering introducing a scheme - or reviewing an existing one - it’s worth ensuring it is set up correctly and delivering the intended benefits.

If you would like tailored advice on how this could work for your business, please get in touch.