Chancellor Rachel Reeves is preparing to scale back tax advantages for employees purchasing expensive bicycles through the popular Cycle to Work initiative, according to reports.
The move, expected to be announced in the Autumn Budget on 26 November, is part of a wider effort to address a significant black hole in public finances estimated at £20billion to £30billion.
What is Changing in the Cycle to Work Scheme?
The Chancellor is reportedly set to introduce a new spending cap on bicycles bought through the salary sacrifice scheme. This would reverse a 2019 decision by the previous Conservative government, which removed the £1,000 price cap to encourage the uptake of generally more expensive e-bikes.
The Cycle to Work scheme allows employees to get a bike and accessories through an interest-free loan from their employer. The cost is then deducted from their gross salary each month, before income tax and National Insurance are applied.
This mechanism means that higher-rate taxpayers can save 42 per cent on the cost of a bike, while basic-rate taxpayers save 30 per cent.
Why is the Government Making This Change?
A Government figure told the Financial Times that the scheme's intent is being undermined. 'Cycle to Work should be about helping ordinary commuters switch to greener travel,' they said. '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.'
There is said to be concern that some higher-rate taxpayers are exploiting the scheme to buy high-performance road bikes costing £10,000 or more at a significant discount.
The cost to the Treasury of the Cycle to Work scheme has risen sharply, from £55million in 2019-20 to an estimated £130million in 2024-25.
Industry Reaction and Potential Consequences
Bike manufacturers have expressed alarm, warning that reducing the scheme's generosity could hinder progress towards environmentally-friendly travel.
Will Pearson, co-owner of London-based Pearson Cycles, argued against the change. 'The Government should leave the scheme alone or, ideally, improve the incentives rather than restrict them,' he said. 'Customers are far more likely to consistently use their bikes if they are of a certain quality, reliable and efficient... This often comes at a higher price tag.'
This potential clampdown on the Cycle to Work scheme forms part of a broader review of salary sacrifice benefits as the Chancellor seeks new revenue streams ahead of her crucial Budget announcement.
