The days of funding your next Pinarello Dogma purchase via Cycle to Work may be over.
According to the Financial Times, Chancellor Rachel Reeves is planning to introduce a cap on the value of Cycle to Work purchases in the UK budget at the end of this month.
The FT quotes a government figure as saying: “Cycle to Work should be about helping ordinary commuters switch to greener travel, not giving tax breaks to high earners buying £4,000 ebikes for weekend rides in the Surrey Hills. Taxpayers shouldn’t be footing the bill for luxury leisure.”
The FT quotes an estimate by HM Revenue and Customs that Cycle to Work cost £130m in lost Treasury revenue in 2024-25, due to the income tax not collected on purchases made via salary sacrifice, an increase from £55m in 2019-20.
In contrast, a study by Cycle to Work scheme providers earlier this year found a net annual benefit to the UK economy of £573m from factors such as cost savings to the user, productivity increases and retail income. There's £43.8m collected by the Treasury in VAT on Cycle to Work purchases, too.
The study found that almost 200,000 employees used Cycle to Work in 2023-24 and more than 2 million since the scheme started. It stated 38% were new cycle commuters.
The previous cap of £1,000 on Cycle to Work purchases stood from the scheme’s inception in 1999 until 2019. The rapid bike price inflation over the period of the Covid pandemic and the inclusion of electric bikes in the scheme, along with the rising use of cargo bikes (many of which are also electric), put many bikes and ebikes beyond the £1,000 level. An electric cargo bike can cost in the range of £5,000.
Since 2019, there’s been no cap on the cost of bikes or ebikes, along with accessories and clothing, that can be bought under the Cycle to Work scheme.
It's acknowledged that some higher-rate taxpayers have been exploiting the scheme, though, to fund purchases of top-spec bikes that almost certainly never see the inside of their employers’ bike sheds.
The FT quotes Will Pearson of Pearson Cycles, however, who points out that a reliable bike for commuting is likely to cost more and that any cap needs to be set at a sensible level.
The likely cap on the value of Cycle to Work purchases would be part of a more general cap on salary sacrifice by the Treasury, likely to include pension schemes.
