Tax incentives
Cycle mileage
Employees who use their own cycle for work (i.e. for cycling on business, not to and from work) are entitled to 20p per mile, tax-free. (N.B. there are different arrangements for self-employed people who use their cycles for business purposes. If this applies to you, it's best to talk to your accountant or tax office directly to find out what you can claim, and what you can't).
If an employer pays less than this, or no cycle mileage rate at all (which is not a good thing, of course!), an employee can still claim tax relief by contacting HMRC (Her Majesty's Revenue and Customs) directly.
For more, see HMRC’s guidance for employees who use their own vehicles for work
For Cycling UK's formal policy on cycle commuting and cycle-friendly employers, see our campaigns briefing. This briefing includes facts and figures, along with a range of background information.
Lending or hiring cycles or cyclists’ safety equipment
If an employer lends or hires cycles or cyclists’ safety equipment to employees, the benefit of this is exempt from tax on employment income. The cycles or equipment should be generally available to all employees, and mainly used for travel between home and the workplace.
The exemption also covers the provision of a voucher for hiring bicycles and equipment.
The relevant legislation does not define exactly what is meant by ‘safety equipment’, but HMRC says that it includes such things as:
- Cycle helmets which conform to European standard EN 1078
- Bells, bulb horns and lights including dynamo packs
- Child safety seats
- Reflective clothing along with white front reflectors and spoke reflectors
It does not include:
- Cycle computers
- Waterproof clothing that is not reflective clothing
- Cycle training
See HMRC's exemption for bicycles factsheet
Cycle to Work scheme
More and more employers are providing cycle/cycling safety equipment to their staff in conjunction with salary sacrifice arrangements, by subscribing to the Government's ‘Cycle to Work Scheme’. (N.B. again, self-employed people can't participate in this scheme, but there are other ways of obtaining tax relief for cycling on business).
Through this scheme, the employee usually pays a monthly rental, which is deducted from their salary before national insurance and income tax. This means that their taxable income is smaller, so they pay less tax and, in doing so, make significant savings on the cycle itself.
The employee should use the bike mainly for commuting to and from their workplace (although using it for pleasure is not disallowed, this should not be its main purpose).
For tax and national insurance purposes, there is no limit on the value of the cycle and safety equipment that an employer can offer an employee (although employers should note the advice given by the Department for Transport (DfT) on Financial Conduct Authority authorisation - link to the Dft's guidance below).
The scheme applies to bicycles, tricycles or a cycle with four or more wheels, and e-bikes.
At the end of the loan period, typically 12 months, the employer can invite the employee to buy the equipment.
The DfT's guidance (link below) explains how to calculate the value at that point, taking account of its original price and age.
Otherwise, an employer can give the employee two other options: to extend the hire agreement, or return the cycle and the equipment.
VAT:
VAT is charged when someone hires a cycle/equipment from their employers under the scheme, and also if they decide to buy it at the end of the loan period (although it's not charged if a cycle has been specifically adapted for someone with a disability). Helmets are zero-rated.
Reluctant employers? Some employers hesitate to introduce the scheme because they worry about the administrative burden. However, there are a number of companies – or ‘cycle scheme facilitators’ (usually, but not necessarily bike shops) - set up to help. They are very easy to identify through a search of the Internet.
Some employers are also concerned about encouraging cycling because they think it’s risky and that they could be held liable if an employee is injured. As we explain elsewhere, the benefits of cycling far outweigh the risks and cyclists cause very little harm to other road users. It also helps keep the workforce fit, reduces absenteeism and reduces an organisation’s adverse impact on the environment. Encouraging cycling is, therefore, the responsible thing to do.
For more on the Cycle to Work Scheme, see:
The Department for Transport’s guide to the scheme
Cycling breakfasts
Employers used to be able to provide a tax-free breakfast to cyclists on designated ‘Cycle to Work’ days, to encourage people to try cycling to work. Sadly, this relief was repealed from 6 April 2013.
