Chancellor Rachel Reeves is preparing to cap spending on the government’s cycle to work scheme after high earners increasingly used salary sacrifice benefits to buy premium electric bikes costing over £4,000.
Financial Times reports Treasury officials are concerned that generous tax breaks designed to promote greener commuting are subsidising luxury e-bike purchases instead.
A senior government figure said ministers wanted the initiative to return to 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.”
E-bikes have become the fastest-growing category in the scheme. Higher-income professionals can save up to 42% on bike costs via salary sacrifice.
With top-spec electric models regularly exceeding £3,500–£10,000, the Treasury fears the subsidy is being captured by wealthier users.
Scheme Costs Double
The cycle to work scheme launched in 1999. It allows employees to get bikes and accessories via employer-funded, interest-free loans repaid through gross salary before tax.
The cost to taxpayers has risen from £55m in 2019–20 to £130m in 2024–25 – partly due to soaring popularity of high-end e-bikes.
The original £1,000 cap was scrapped six years ago to accommodate pricier commuting options like cargo bikes and electric bikes. But removing limits has encouraged some participants to buy top-end electric mountain bikes, carbon e-road bikes and advanced commuter e-bikes using the tax break.
Retailers Push Back
Bike shops warn that restricting the scheme could backfire. Will Pearson, co-owner of London-based Pearson Cycles, told the FT any new cap must be carefully considered to avoid stalling the UK’s shift towards cleaner travel.
“Customers are far more likely to consistently use their bikes if they are of a certain quality, reliable and efficient – and that often comes at a higher price tag. The government should leave the scheme alone or, ideally, improve the incentives rather than restrict them.”
Research shows e-bikes are one of the most effective tools for reducing car usage – particularly for longer or challenging commuter routes.
Transport analysts warn that limiting access to these bikes could slow progress on reducing emissions and congestion in major cities.
The Treasury hasn’t yet responded to requests for comment.
