UK government might clamp down on cycle-to-work tax perks
Comments Off on UK government might clamp down on cycle-to-work tax perksSource: Cycling Electric, EV Powered, FT
The UK Chancellor, Rachel Reeves, is reported to be considering placing a cap on the amount employees can spend on bikes under the Cycle to Work scheme, as stories of individuals spending large amounts on high-end electric leisure models make headlines.
The plan has prompted heated discussion in the cycling and wider transport industries, with many highlighting that electric bikes, including cargo models enabling zero-emission family transport, may have a higher price tag than traditional bikes, but are highly effective in providing green commuting options.
Under the Cycle to Work scheme, employees can purchase a bike and accessories through an interest-free loan via their employer, which they pay back through payroll deductions. When the scheme was introduced in 1999, an upper limit of £1,000 was in place, but this was removed in 2019. The government’s own figures show that the vast majority of purchases made through the scheme come under the £2,000 mark, with only 6% over £2,000.
The argument and counter-arguments
A headline-grabbing statement by an unnamed government figure has been countered with insights from cycling and transport industry representatives. The government official said, “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.” The available HM Revenue & Customs (HMRC) figures show there were approximately 209,000 scheme claimants in 2023-24 with a baseline cost of £130 million, an increase from 167,000 in 2019-20 with a cost of £55 million.
Sarah McMonagle, Director of External Affairs at Cycling UK, highlighted the successes of the scheme, while pointing out its current limitations in only being available to PAYE employees, which excludes those such as the self-employed or in less formal working situations. “The Cycle to Work scheme plays a really important role in encouraging people to travel in a healthy and more affordable way – but we need a more progressive plan to support more people on lower incomes, or in unstable work, to cycle. While capping the scheme may sound like a sensible way for Ministers to save money, in reality, it will cost the government a lot more. For every £1 spent on the Cycle to Work scheme, we see over £4 in returns: boosting productivity, reducing sick days, and saving households money.
“With the popularity of e-bikes and cargo bikes soaring, supporting these trends is not just good for individuals, but for the economy as a whole. Any proposal to cap the scheme must consider people who require higher-cost cycles, such as cargo bikes or assisted cycles for disabled people. If the government is serious about providing equal access to active travel, it needs to tailor the scheme to take into account women, families, those with disabilities and people in lower paid or unstable work.”
A cycle retailer perspective comes from Will Pearson, co-owner of Pearson Cycles. “Customers are far more likely to consistently use their bikes if they are of a certain quality, reliable and efficient – and that often comes at a higher price tag. The government should leave the scheme alone or, ideally, improve the incentives rather than restrict them.”
Jamie Milroy, CEO and Founder of cycle-to-work platform Dash, responded with data gleaned from the platform: “Just 1.25% of transactions are for more than £5k, with many including adapted cycles or family/cargo-style bikes.
“These are the bikes which arguably deliver the highest benefit for the scheme!
“Let’s also remember the scheme has a powerful self-regulating mechanism in that employers must fund/guarantee employee activity, providing natural checks while allowing discretion for higher value purchases where there’s need.”