Bike Week 2025, the UK’s biggest celebration of cycling, is taking place this week. Bike Week is all about showcasing how cycling can fit into everyone’s daily lives.

From an employer’s perspective, encouraging cycling to work can demonstrates a clear business focus on sustainability. Cycling is also shown to have strong wellbeing benefits. With that in mind, this Bike Week, we take a look at how employers can use cycle to work schemes to encourage employees to commute to work by bike.

What are cycle to work schemes?

They are schemes where an employer lends or hires bicycles or cycling safety equipment (or provides vouchers for hiring bikes and equipment) to employees. If set up correctly, the benefit is exempt from income tax. Employees receive a tax benefit as a result.

To be exempt from income tax the scheme must meet the following rules:

  • The benefit must be offered to all employees (although they don’t all need to take it up).
  • The bike or equipment provided must be used mainly for travel to and from work. Travel to and from work includes travel between workplaces; travel during the working day to access amenities and circumstances where only part of the commute is cycled (for example, where an employee cycles to a train station and completes their commute by train).
  • Other uses are allowed (including use of the cycle or equipment by other family members) provided that they aren’t the main use.

How can employers make sure the bike is mainly used for commuting?

Employers can ask employees to confirm in writing that the bike will mainly be used for commuting and require them to notify if the situation changes.

There’s no need for detailed journey records. Employers only need to question usage if there’s clear evidence that less than half the use of the bike or equipment is on commuting.

What is salary sacrifice and how does it work?

Salary sacrifice arrangements operate by an employee giving up part of their gross salary in exchange for a benefit. They are often used as the mechanism for delivering cycle to work benefits. Employers generally pay for the bike (or for a scheme) upfront, and the bike is then paid for by the employee via monthly (gross) pay reductions. Both employer and employee save on tax/NIC as a result.

The employee must agree in writing to sacrifice their salary before they receive the benefit. It cannot be done retrospectively.

Who is eligible?

All PAYE employees can join, as long as salary sacrifice doesn’t reduce their pay below the National Minimum Wage.

If it would, those employees must be excluded from salary sacrifice – but the cycle scheme must still be made available to them in some other way. This is essential to maintain the tax exemption, which requires the scheme to be open to all employees.

The bikes don’t need to be offered on identical terms, just made available.

Are there any limits?

In June 2019 the Department for Transport (DfT) updated their cycle to work guidance; making it acceptable for employees to request a Certificate of any value via the cycle to work scheme. This removed the limit on the value of this benefit – meaning that expensive bikes and equipment can now be offered via salary sacrifice cycle to work schemes.

‘Electrically Assisted Pedal Cycles’ (E-bikes) can be included in cycle to work schemes.

Who owns the bike purchased through the scheme?

Different schemes operate in different ways. Bike ownership generally depends on the end-of-scheme agreement. Schemes generally run for 12 months (although they don’t have to). There are three main options: return the bike, buy it at a fair-market price (usually around 7–25% of value), or extend the hire (some schemes offer long-term free loan).

What are the potential issues?

  • Salary sacrifice can’t dip pay below national minimum wage. This needs to be monitored by payroll.
  • These schemes require robust payroll setup, provider codes/vouchers, and value assessments at the end.
  • If the employee leaves before the scheme ends, you need to have rules in place setting out how the agreement ends and how the bike is handled.
  • Employers should advise users to maintain and look-after the bike and any equipment and consider security, especially when stored off-site.

Summary

Cycle to work schemes offer substantial tax and NIC savings while promoting healthier, greener transport. With the lifting of the price cap and extending to e-bikes, they’re a high-value perk – if properly managed with payroll care, policy clarity, and legislative compliance.

HR Inner Circle members can head over to the Vault where you will find supporting documents including a salary sacrifice factsheet for employers, a salary sacrifice flowchart and template letters to be used by employees to confirm their wish to sacrifice salary.