A budget cap is expected to be imposed on the Cycle to Work scheme in the upcoming Budget, it has been reported.
The scheme, launched in 1999, allows people in the UK to save tax on bikes by 'loaning' them from their employers, allowing prospective cyclists to save up to 42% on the cost of a full price bike, with payments automatically deducted from their salary.
On Thursday, the Financial Times reported that the chancellor, Rachel Reeves, is expected to limit how much someone could spend on a bike through Cycle to Work, after speaking people at the Treasury.
One source 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 initial cap of £1,000 was binned in 2019, with bikes becoming regularly more expensive. However, it seems some kind of limit will be reintroduced; it might see many mid-range bikes taken out of the scheme, with e-cargo bikes and road bikes regularly costing well over £3,000.
According to the FT, there were 209,000 claims through the scheme in 2023-24, up from 167,000 in 2019-20. The amount of money the Cycle to Work scheme cost rose from £55 million in 2019-20 to £130 million in 2024-25.
Last month, data from the Cycle to Work Alliance showed that the system brought £219 million in bike and accessory sales last year. The analysis also showed that it brings the British economy £573 million in annual economic benefits across retail, productivity, health, and household savings.
The UK government makes £4.40 on every pound put into the scheme, according to the research, and a significant proportion of those using the scheme, over a third, were buying their first bikes.
At the time, Lilian Greenwood, the UK's local transport minister, said that the Cycle to Work Scheme was a "real success story".
Cycle to Work is also controversial with some in the bike industry in the UK, with commissions that scheme providers charge being a particular issue for local bike shops.
The proposed cap is unlikely to be welcomed by the bike industry in the UK, with cycle retailers already struggling in the wake of the Covid boom and the cost of living crisis.
Will Pearson, the co-owner of London-based Pearson Cycles, told the FT that he hoped the new limit would be at a "sensible level".
"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."
