In a busy town or city, a bike is often the quickest way to get to work. If you run your own limited company, there is a bonus: the company can provide the bike, claim tax relief on the cost, and you can ride it without a tax charge, as long as a few conditions are met.
There are two main routes. The company can simply buy a bike and lend it to you, or it can run a cycle to work salary sacrifice scheme. For most owner-managed companies, the first route is simpler and cheaper.
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Book a Free CallRoute 1: the company buys the bike
The company buys the bike and keeps ownership. You use it. Under ITEPA 2003, s.244 there is no benefit in kind if all three conditions are met:
- The bike stays owned by the company. It is not transferred to you.
- You use it mainly for qualifying journeys, meaning commuting between home and work or travelling between workplaces.
- Bikes are available generally to all employees who want one.
“Mainly” means more than half of its use. Weekend and leisure rides are fine as long as they are not the main use. HMRC says in EIM21664 that detailed mileage logs are not needed and it accepts the test is met unless there is clear evidence otherwise. Electrically assisted pedal cycles (e-bikes) are covered too.
Safety equipment is also exempt under the same rules, including helmets, lights, bells, child seats and reflective clothing. Cycle computers and ordinary waterproofs are not.
If you are the only director and there are no other staff, the availability condition is usually easy to meet. If you have employees, the offer must be open to them as well.
Tax relief for the company
A bike is plant and machinery, so the cost normally qualifies for the annual investment allowance, giving 100% relief against profits in the year of purchase. A VAT-registered company can usually reclaim the VAT where the bike is bought for business use, though private use can affect this, so check the position first.
Worked example: company bike versus buying it yourself
Sam is a higher rate taxpayer and the sole director of a VAT-registered company paying 25% corporation tax. He wants a £2,400 e-bike (including £400 VAT).
Company buys it: the company reclaims £400 VAT, claims the annual investment allowance on £2,000 and saves £500 in corporation tax. The net cost is £1,500 and Sam pays no benefit in kind tax.
Sam buys it personally: he needs £2,400 after tax. At the 35.75% higher dividend rate, the company must pay a dividend of about £3,736 from profits that have already suffered corporation tax.
The company route costs less than half as much.
Let us handle the paperwork
We can record the purchase, capital allowances and VAT correctly in your accounts. Get a fixed fee for your company bookkeeping.
Get a Fee EstimateRoute 2: cycle to work salary sacrifice
Under a cycle to work scheme, an employee gives up part of their gross salary in return for the use of a bike. Because the pay is reduced before tax and National Insurance, the employee saves on both and the employer saves employer National Insurance (15% in 2026/27). Cycles are one of the few benefits still protected from the optional remuneration rules introduced on 6 April 2017.
| Who saves | Rate | Saving |
|---|---|---|
| Employee income tax | 20% | £240 |
| Employee National Insurance | 8% | £96 |
| Employer National Insurance | 15% | £180 |
The catches
- Salary sacrifice cannot take pay below the National Minimum Wage (£12.71 an hour from April 2026 for those aged 21 and over).
- Directors on a small salary with the rest taken as dividends gain very little, because there is little tax or National Insurance on the salary to save.
- There is more admin: a hire agreement, payroll changes and records.
Buying the bike at the end
If the employee wants to keep the bike when the hire ends, they must pay its market value to avoid a benefit in kind. HMRC’s optional valuation table helps.
| Age of bike | Under £500 | £500 or more |
|---|---|---|
| 1 year | 18% | 25% |
| 2 years | 13% | 17% |
| 3 years | 8% | 12% |
| 4 years | 3% | 7% |
| 5 years | Negligible | 2% |
The original price includes equipment fitted to the bike, such as lights and bells, but not items you wear, such as helmets.
Which route suits you?
For a one-person company or a director paid mostly in dividends, the company simply buying and lending the bike is usually the cleanest option. Where you have several employees on normal salaries, a cycle to work scheme can be a valued perk that saves tax for everyone.
Plan your tax-free benefits
Bikes are just one option. A free call can help you build a tax-efficient benefits package for you and your staff.
Book a Free CallDisclaimer: This article is for general information only and does not constitute legal, tax or financial advice. Your specific position depends on your individual circumstances. Always speak to a qualified tax adviser before making any decisions.
