Cycle to work scheme

The UK is in a sorry state. Pollution is killing tens of thousands of people every year, our roads are congested to the point of uselessness, and Type 2 Diabetes could afflict 5 million people as they slide into obesity and sedentary lifestyles.

The UK is holding out for a hero, and there’s an unlikely one riding over the horizon ready to clean up the environment, de-congest our roads and whip us all into shape – the humble bicycle.

Cycling to work is commonplace in The Netherlands, where there is almost one bike for every citizen. Other European countries like Finland, Germany and Denmark have bike ownership rates north of 60%, while the UK has ownership rates of around 44%.

Recognising the bicycle’s potential to transform the UK’s environment, health and roadways – successive Governments have done plenty to promote cycling. The Liberal Democrats and Conservatives allocated almost £150 million to cycle-friendly schemes between 2010 and 2015, and way back in 1999 the Labour administration introduced the idea of cycle to work schemes.

These schemes allowed employers to loan bicycles and equipment to employees as a tax-free benefit. The employee could then pay off the cost of the bicycle by having monthly instalments automatically subtracted from their paycheque. The employer gets a nice benefit for their staff, the employee gets a bike (cheaper than if bought direct from a shop and with no up-front cost) and a healthier lifestyle, and the country gets one less car on the road – everyone wins!

The self-employed are unable to operate a cycle to work scheme (they can’t even claim mileage on eligible business travel by bicycle unlike limited company directors or employees who are able to), but a limited company with any number of employees can offer their staff a scheme.

Get scheming

If you want to offer your team a cycle to work scheme, the rules you need to follow are surprisingly relaxed. You can either operate the scheme yourself, or use a third-party provider. If you’re a larger business a third-party provider could be a good idea – they can handle the admin, usually at no cost to you.

The rules around what bikes and equipment are eligible for a cycle to work scheme are also pleasingly broad – any bicycle or tricycle is allowed (although not unicycles – sorry, budding circus performers), including electric bikes. You can even claim for a “a cycle having four or more wheels”, if you can find such a fantastical contraption for sale.

Equipment covered is exactly what you’d expect – helmets, lights, hi-vis clothing, puncture repair kits and panniers are all A-OK.

There isn’t an upper limit on the cost, however if your employee wants a bicycle worth over £1,000 you may require a group credit license. An employee can even get two bikes under the scheme if they want.

When it comes to paying for the bikes and equipment, the company running the scheme has a few options.

You can simply buy the bike your employee wants and let them use it, which would mean no direct cost to your employee. You can treat the cost of the bike and equipment as capital expenditure, and claim capital allowances. The cost would also qualify for the Annual Investment Allowance.

Or you can recoup the cost of the bike by taking a bit of your employee’s salary every month (this is called a salary sacrifice scheme) – this way you’re basically providing a loan for your employee. Once your employee has paid off the cost of the bike and equipment you can give them the bike or, if you’re feeling like a Scrooge, keep it for yourself.

Claiming the right expenses is the best way to minimise the tax you pay, so, why not take a look at our handy articles on limited company business expenses or sole trader business expenses.

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Tom West
Community and Social Manager
Updated on
September 23, 2020

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