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What is the cycle to work scheme?
The Cycle to Work Scheme is a UK government initiative designed to encourage healthier, greener commuting by making it cheaper for employees to get a bike and essential cycling equipment. It works through a salary sacrifice arrangement, where employees agree to give up a portion of their gross salary in exchange for the use of a bike, reducing the amount of tax and National Insurance they pay. Employers purchase the bike, and staff effectively “hire” it over an agreed period, with the option to take ownership at the end. The scheme aims to cut congestion, lower emissions, and promote physical activity, while also helping people access quality bikes at a significantly reduced cost.
If you’re a basic-rate taxpayer, you can typically save around 32% on the cost of your bike, made up of 20% income tax savings and 12% National Insurance savings. For higher-rate taxpayers, the saving rises to about 42%, combining 40% income tax savings with 2% NI savings.
What’s happening now?
The chancellor, Rachel Reeves, is reportedly preparing to cap how much workers can spend on bicycles through the Cycle to Work scheme, tightening the rules on salary-sacrifice benefits for both manual and electric bikes. According to briefings reported in the Financial Times and shared in the Guardian, the move stems from concerns that subsidising higher-value bike purchases may not be the best use of taxpayers’ money. The cost of the scheme rose from £55m in 2019-20 to £130m in 2024-25 Yet the proposal raises a bigger question: In a country desperately trying to shift people into healthier, greener, more affordable modes of transport, is this really the policy lever to pull? Before the government puts a limit on what people can ride, it might want to consider what it stands to lose.
Is the scheme being abused?
According to this article in The Guardian, One government figure told The Financial Times: “Cycle to work should be about helping ordinary commuters switch to greener travel, not giving tax breaks to high earners buying £4,000 e-bikes for weekend rides in the Surrey Hills. Taxpayers shouldn’t be footing the bill for luxury leisure.”
Quantitative and qualitative research published in 2023 shows 67% of the people who have used the scheme are earning under £49,999. In my view, this quashes the notion that the cycle to work scheme is being used by the wealthy, simply as a tax break, with only 6% of the top earners (≥£100k) making use of the scheme. Sure, there will be a few expensive bikes being ridden around the Surrey hills, but enough to warrant a complete overhaul of the cycle to work scheme? Hardly.
Perhaps the government needs to rethink its position and recognise the Cycle to Work scheme for what it is: A clear success. The 136% increase in scheme costs isn’t evidence of abuse, but simply more people are using it, which is surely the point, and let’s not forget the rising price of bikes over the past decade has naturally amplified that growth.
On the subject of ‘expensive bikes’, although £4,000 may sound like a lot of money for a bike, we must remain mindful that the cost of everything has increased significantly. A comparable practical view of this would be to look at how the cost of new vehicles has dramatically risen over the last decade. According to an article written by Autocar, they say “over the past 10 years, the average list price of a new petrol car has soared from £27,035 to an eye-watering £45,218. That’s up 67 per cent, significantly more than general consumer price inflation and wage growth.”
Grant Georgiades-Co-Founder of Yellow Jersey and MD of The Plan Group
“I’m a passionate e-cargo bike user. I’m averaging over 120k per month since swapping my second car to one around 3 years ago. So, I’m always enthused when I see other families benefitting from the use of one. However, I’ve noticed over time that it appears the users are heterogeneous. Why are only white, seemingly middle-class people riding them? The primary reason I converted was financial. I was spending around £250 a month to run a car that hardly did any mileage, and the journeys it did perform could be done on a train, bus or bike. The e-bike offered the convenience of avoiding jams on Lewisham’s congested local roads, plus the added satisfaction of reducing emissions.
But, the main driver (no pun intended) of the decision was cost saving. I used the ride to work scheme and I paid off the bike purchase in 12 months. It was cost neutral in the first year compared to the car. And now, other than a few servicing bills, I’m 3k a year up against the cost of a small run around. So why aren’t more low-income families utilising a cargo bike?
Well, part of the answer to that question was in my opening sentence. I was able to justify shedding the second car. Yet, most families, even in London with its abundance of public transport, still feel the need to have access to a car. I understand that need. But could a better structured cycle to work scheme tempt them away from that thinking? Easy for me to say, I know, but I believe a high number of people would benefit from the swap.
For the uninitiated, the initial purchase price of a cargo bike is high. So my thinking is that a cycle scheme that offers far more generous support to families with lower household income might be what is needed. This would begin the process of convincing people to give it a go. Once they’ve tried, I think they’ll see the merits of persisting”
A drop in the ocean
At a time when the Spending Review 2025 shows the government is massively increasing investment in public services, transport, and long-term infrastructure, it’s all the more bewildering that the Treasury is turning its fire against cyclists. According to the review, total departmental budgets will grow by 2.3% in real terms over the SR period.
Meanwhile, for transport capital, the government is pumping in huge sums: for example, £2.3 billion is committed via the Local Transport Grant in phase 2 for improvements that explicitly include “cycleways and congestion improvement measures.”
In that context, singling out the Cycle to Work scheme, a relatively modest tax incentive for trimming, is puzzling. Rather than undermining a policy that promotes active travel, public health, and lower-carbon commutes, the government should double down on the very infrastructure it claims to prioritise. The review also allocates £15.6 billion by 2031–32 to city-region transport authorities, supporting zero-emission buses, trams, and local rail- infrastructure that, if paired with strong incentives for cycling, could transform how people move around our towns and cities.
Cutting back on the Cycle to Work scheme risks not only reducing the number of new cyclists (and with them the health, congestion, and climate benefits), but also undermining the economic and social return on the very capital investments the government is bragging about. If Reeves and her team are serious about “renewal,” then strangling one of the most efficient levers for switching to green transport makes no sense, especially when far larger spending pots are forgoing that kind of behavioural payoff.
What are your thoughts? Have you used the cycle to work scheme? Do you think there should be an upper limit to the bicycle value allowed. We’d love to know, so please let us know in the comments.
