Reeves Plans to Curb Tax Breaks for High-Cost Bikes Purchased Through Salary Sacrifice
Shadow Chancellor Rachel reeves is reportedly planning to introduce a cap on the amount individuals can spend on bicycles purchased through the Cycle to Work scheme, aiming to limit tax benefits for expensive bike purchases.The move, expected to be included in this month’s budget, comes amid concerns the scheme is disproportionately benefiting higher earners and represents a questionable use of taxpayer funds.
Launched in 1999 under Tony Blair’s Labour government, the Cycle to Work scheme allows employees to acquire bikes and accessories via an interest-free loan from their employer, with repayments deducted from gross salary before tax and National Insurance contributions. The scheme’s cost has risen significantly, from £55 million in 2019-20 to £130 million in 2024-25.
A previous cap of £1,000 was removed six years ago following criticism that it restricted access to more expensive models, including e-bikes and cargo bikes. The scheme currently offers potential savings of 42% for higher-rate taxpayers and 30% for basic-rate taxpayers.
however, reports indicate some higher earners have been utilizing the scheme to purchase bikes costing upwards of £10,000. One government source, speaking to the Financial Times, stated: “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.”
Will Pearson, co-owner of London-based Pearson Cycles, cautioned that a new limit must be ”sensible” but warned it could hinder progress towards environmentally amiable transportation. “The government should leave the scheme alone or, ideally, improve the incentives rather then restrict them,” Pearson told the financial Times.”Customers are far more likely to consistently use their bikes if they are of a certain quality, reliable and efficient. This frequently enough comes at a higher price tag.”
The Treasury has been contacted for comment by The Guardian.
