Rachel Reeves is preparing to scale back the tax benefits available through the government’s popular cycle to work scheme, amid concern that high earners are exploiting the programme to buy luxury bicycles at the taxpayer’s expense.
According to a report in the Financial Times, the Chancellor is expected to introduce a cap on the value of bicycles that can be purchased using salary sacrifice arrangements. The move is likely to be announced in the forthcoming Budget later this month, as the Treasury looks for ways to tighten spending while still supporting greener travel choices.
A government figure told the newspaper that the scheme must refocus on its original purpose.
“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.”
Launched by Tony Blair’s government in 1999, the cycle to work scheme allows employees to purchase a bike and accessories via an interest-free loan from their employer, with monthly repayments taken from gross salary before income tax and national insurance are applied.
The cost to the Exchequer has risen sharply, from £55 million in 2019–20 to £130 million in 2024–25, prompting questions about whether the system still represents value for money.
The original £1,000 cap on purchases was removed six years ago after complaints that it excluded a wide range of modern commuter bikes, including e-bikes and cargo bikes. As a result, higher-rate taxpayers can now save up to 42% on the cost of a bike, and basic-rate taxpayers around 30%.
But the absence of a ceiling has led some high earners to buy bikes costing more than £10,000 through the scheme — a trend that ministers now want to address.
Retailers warn, however, that imposing a strict cap could undermine progress on sustainable travel. Will Pearson, co-owner of high-end retailer Pearson Cycles, told the FT that any limit must be set “sensibly” to avoid deterring commuters from choosing reliable, well-built bikes.
“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.”
Environmental campaigners have also long argued that e-bikes — typically more expensive than standard bikes — are among the most effective tools for shifting commuters away from cars, particularly for longer or hillier journeys.
The Treasury has been approached for comment.
