Net cost of bike via Cycle to Work.
Net cost to you
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Salary sacrifice, applied to a bike
Cycle to Work lets you get a bike and safety kit through your employer and pay for it out of gross salary rather than the money left after tax. Mechanically, you agree to give up part of your salary over a hire period, usually twelve months, in exchange for the use of the bike. Because the sacrifice comes off your pay before Income Tax and National Insurance are worked out, those deductions are calculated on a smaller salary, so the bike effectively costs you less than its ticket price. This tool shows the net cost after that relief and the cash you save.
The calculation is straightforward: it takes the bike price and removes your combined Income Tax and National Insurance rate, since that is the proportion of the cost the taxman would otherwise have taken from the equivalent gross earnings. It is aimed at any employee whose workplace offers the scheme and who wants to know, before signing up, whether the saving is worth the commitment.
Income tax and National Insurance, stacked
The saving comes from two reliefs stacked on top of each other. The first is your marginal Income Tax rate, 20 percent for a basic-rate taxpayer, 40 percent for higher-rate, 45 percent for additional-rate. The second is employee National Insurance, charged at 8 percent on earnings between the primary threshold and the upper earnings limit for 2025/26, dropping to 2 percent above that limit. The tool lets you set the NI rate yourself because which one applies depends on where your salary sits. A higher earner above the upper earnings limit only saves 2 percent of NI on the sacrifice, whereas a basic-rate earner below it saves the full 8 percent, so combined relief ranges widely.
Scotland is worth a word here. Scottish taxpayers pay devolved income tax rates, so a Scottish basic-rate or intermediate-rate employee has a different marginal income tax rate from the rest of the UK, which changes the income tax slice of the saving. National Insurance, by contrast, is the same across the whole UK. If you pay Scottish Income Tax, set the tax rate box to your actual Scottish marginal rate.
A £1,500 bike for a 40 percent taxpayer
Take the defaults: a £1,500 bike, a 40 percent marginal tax rate, and 2 percent National Insurance, the rate for a higher earner above the upper earnings limit. Combined relief is 42 percent.
| Step | Figure |
|---|---|
| Bike price | £1,500 |
| Income Tax relief (40%) | £600 |
| National Insurance relief (2%) | £30 |
| Total saving (42%) | £630 |
| Net cost to you | £870 |
So a £1,500 bike costs about £870 after relief, a saving of £630. A basic-rate taxpayer below the upper earnings limit, saving 20 percent tax plus 8 percent NI, gets 28 percent relief, a £420 saving and a net cost of £1,080. The higher your marginal rate, the larger the discount, which is the quiet reason the scheme is so popular with higher earners.
The end-of-scheme fee nobody mentions
This tool shows the saving on the hire payments, but it does not include the final transfer fee, and you should factor that in separately. At the end of the hire period the bike still technically belongs to the provider, and to own it outright you usually pay a small market-value fee. HMRC publishes valuation percentages that fall the longer you keep the bike, which is why many schemes extend the hire to three or four years for a nominal fee before transferring ownership, keeping that final cost tiny. It rarely erodes much of the saving, but pretending it is zero is the common mistake. Build a modest end fee into your own thinking.
One more practical point: the salary sacrifice reduces your gross pay, which in turn can nudge down anything calculated from it, such as your pension contributions if they are a percentage of gross, or statutory maternity pay in the relevant reference period. For most people the effect is trivial, but it is worth knowing the sacrifice is real and touches more than just take-home pay.
Is there still a £1,000 limit on the bike?
Not legally. The old £1,000 cap was removed in 2019 for schemes run by Financial Conduct Authority authorised providers. Many employers still set their own £1,000 ceiling to avoid the extra consumer credit obligations, but larger providers routinely offer higher limits, which is why electric bikes costing several thousand pounds now go through the scheme. Check your own employer's cap before assuming a high-value bike qualifies.
Can I join if I earn near the minimum wage?
Possibly not for the full amount. A salary sacrifice cannot take your pay below the National Minimum Wage, so employers limit or refuse the scheme for lower-paid staff to stay compliant. If the sacrifice would push your hourly pay under the legal floor, the employer must cap it. This is the single most common reason an otherwise eligible employee is turned down.