There are special rules involving bicycles usually referred to as 'Cycle to Work' arrangements. The Cycle to Work scheme was introduced in 1999 to help promote the use of healthy ways to commute to work.

The scheme allows employers to provide (technically loan) bicycles and cyclists’ safety equipment to employees as a tax-free benefit. Where the scheme conditions are satisfied, employees can benefit from a tax and National Insurance Contributions (NICs) reduction of between 32% and 42% through a salary sacrifice scheme. In addition, there is no employer liability to NICs.

The cycle to work benefits relate to the loan period, however, it is commonplace for an employer or a third party bicycle provider to sell the employee the bicycle / equipment they have been using after the loan period has ended. The bike may be offered to the employee for sale at a fair market value, but this must be done as a separate agreement.

Planning note

The cycle to work scheme cannot be used if in doing so it would reduce an employee's gross pay below the National Minimum Wage (NMW). HMRC’s guidance recommends, that where an employer has staff near the NMW that the employee be offered a lower value cycle package, and/or a longer than usual hire period to avoid the salary dropping below the NMW and the employee being excluded from the scheme.