Reeves set to curb cycle-to-work tax perks for high earners buying expensive bikes

Rachel Reeves is set to trim tax benefits available through the government’s popular Cycle to Work programme, amid concerns that high earners are taking advantage of the scheme to buy luxury bikes at taxpayer expense.

According to a report in the Financial Times, the Finance Minister is expected to cap the value of bikes that can be purchased using salary sacrifice arrangements. The move is likely to be announced in the next Budget later this month, as the Treasury looks for ways to tighten spending while continuing to support greener travel options.

A government figure told the newspaper that the scheme should refocus on its original purpose.

“The commuter cycle should be about helping ordinary commuters switch to greener travel, not giving tax breaks to high earners who buy £4,000 e-bikes for a weekend ride in the Surrey Hills. Taxpayers should not be footing the bill for luxury leisure.”

The Cycle to Work scheme, launched by Tony Blair’s government in 1999, allows employees to purchase a bike and accessories via an interest-free loan from their employer, with monthly payments taken from gross salary before income tax and National Insurance apply.

The cost to the Treasury has risen sharply, from £55 million in 2019-20 to £130 million in 2024-25, raising questions about whether the system still represents value for money.

The original £1,000 purchase cap 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 about 30%.

But the absence of a cap has led some high earners to buy bikes costing more than £10,000 through the scheme – a trend that ministers now want to tackle.

However, retailers warn that imposing a strict cap could undermine progress in sustainable travel. Will Pearson, co-owner of upscale retailer Pearson Cycles, told the Financial Times that any limit should be set “reasonably” to avoid deterring riders from choosing reliable, well-made bikes.

“The government should leave the program alone or improve incentives instead of restricting them,” he said. “Customers are more likely to use their bikes consistently if they are of a certain quality, reliable and efficient. This often comes at a higher price.”

Environmental activists have also long argued that e-bikes — typically more expensive than regular bikes — are among the most effective tools for diverting commuters away from cars, especially on longer or hillier trips.

The Treasury Department has been contacted for comment.