To encourage cycling to work for a healthier workforce and to reduce harm to the environment, the government created a little publicised incentive in 1999 to encourage employers to help their employees acquire tax-free bikes. In 2005 this scheme was re-branded as Cycle to Work.

Employers can loan bicycles to their staff as a tax-free benefit on the condition that the bicycles are mainly used to get to and from work or for work-related purposes. The scheme allows employees to benefit from a long term loan of bikes and commuting equipment such as lights, locks and panniers completely tax free.

The employer signs up for the scheme. The employee then chooses a bike from an approved supplier which is then bought by the employer. The employee then takes delivery of the bike for their exclusive use, including their commute to work. The price is then deducted from the employees salary by equal instalments over a period of time, usually one to one-and-a-half years. Employees do not pay tax or NI on the income used for repayments. After the period of salary sacrifice, the bicycle is the employees on payment of a ‘fair market value’.

The August 2010 ‘fair market value’ rule clarification by Her Majesty’s Customs and Excise stated 5 percent of the original value of the bicycle if under £500 or 25 percent of the original value had to be paid at the end of the repayment period. This caused concern that the calculation would make it too expensive to purchase the bike after the hire period as it did not take into consideration the condition of the bicycle. Yet savings of between 34 and 42 percent can be made under the new rules.

If an employee is made redundant or otherwise leaves the company with which they started the salary sacrifice scheme, the outstanding amount will be taken from the final salary payment.

Self-employed or employees who do not have a PAYE salary, or are on the national minimum wage cannot take part in a Cycle To Work salary sacrifice scheme.

The businesses listed below have committed to being cycle friendly employers and make it easy for their staff to cycle to and from work, becoming a healthier workforce with improved productivity whilst at the same time reducing their carbon footprint on the environment.

Major public and private sector employers have implemented a new ‘Cycle to Work Scheme’, these include Central Government agencies including the Departments for Health, Transport, the Environment Agency and Communities and Local Government. Most local authorities and NHS trusts now also run the scheme. Private sector companies include BAA (Heathrow and Stansted), Sky, EoN, GlaxoSmithKline, Halfords, Kellogg’s, National Grid, PricewaterhouseCoopers and The Adidas Group. Several universities are also signed up to the scheme as are third sector organisations including Sustrans and the London Cycling Campaign.