Rachel Reeves is preparing to cut the tax benefits of the government’s popular bike-to-work program amid concerns high earners are exploiting the program to buy luxury bikes at taxpayer 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 as part of salary sacrifice arrangements. The move is expected to be announced in the upcoming Budget later this month as the Treasury looks for ways to cut spending while supporting greener travel options.
A government official told the newspaper that the project needed to refocus on its original purpose.
“Bike to work should be about helping ordinary commuters switch to greener travel, not about giving tax breaks to high earners who buy £4,000 e-bikes for weekend rides in the Surrey Hills. Taxpayers shouldn’t have to foot the bill for luxury leisure activities.”
The Cycle to Work scheme, launched by Tony Blair’s government in 1999, allows employees to purchase a bicycle and accessories via an interest-free loan from their employer, with monthly repayments deducted from gross pay before income tax and national insurance.
The cost to the exchequer has risen sharply, from £55m in 2019-20 to £130m in 2024-25, raising questions about whether the system still offers 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, high-tax payers can now save up to 42% on the cost of a bicycle, while low-tax payers can save around 30%.
However, the lack of a cap has led to some high earners buying bikes costing more than £10,000 under the scheme – a trend which ministers now want to tackle.
But retailers warn that imposing a strict cap could undermine progress in sustainable travel. Will Pearson, co-owner of high-end retailer Pearson Cycles, told the FT that any limit must be set “sensibly” so as not to discourage commuters from choosing reliable, well-built bikes.
“The government should leave the system alone or, ideally, improve incentives rather than restrict them,” he said. “Customers are far more likely to use their bikes consistently if they are of a certain quality, reliable and efficient. This often comes with a higher price.”
Environmental activists have also long argued that e-bikes – typically more expensive than standard bikes – are among the most effective ways to steer commuters away from cars, particularly on longer or hillier journeys.
The Ministry of Finance has been contacted for comment.
