Can I Claim Bicycle as a Business Expense?
Yes - via the Cycle to Work scheme, or as a tax-free loan if the bike is used mainly for business travel.
What HMRC Says
Cycle to Work scheme allows tax-free bicycle provision. Alternatively, bikes for business travel are tax-free if business use exceeds 50%.
When You Can Claim
- Cycle to Work salary sacrifice scheme
- Company bicycle for mainly business journeys
- Safety equipment (helmet, lights)
- Bicycle mileage at 20p/mile
When You Cannot Claim
- Personal bicycle with minimal business use
- Leisure cycling equipment
Understanding Bicycle Expenses
Bicycles benefit from some of the most favourable tax treatment of any work-related asset. Whether you use the Cycle to Work salary sacrifice scheme, buy a bike through the company for business travel, or simply claim mileage for cycling to client meetings, there are genuine tax savings available.
The Cycle to Work scheme is the most well-known route. Under this scheme, your company purchases a bicycle and safety equipment, and you hire it through a salary sacrifice arrangement. You give up a portion of your gross salary to cover the cost, saving income tax and National Insurance on the sacrificed amount. For a 40% taxpayer also saving 2% employee NI, the total saving is 42% of the bike's cost. A £1,000 bike effectively costs you £580. The original scheme was capped at £1,000, but since 2019 there is no formal cap, though your scheme administrator may impose one.
For company directors, Cycle to Work can be set up relatively easily, even for single-director companies. The company buys the bike, you enter into a hire agreement, and you sacrifice salary over 12-18 months. At the end of the hire period, you can purchase the bike from the company at fair market value (HMRC guidance suggests 18% of original price for bikes over £500 after a 3-year period, or 25% after a 1-year period).
Alternatively, if you use a bicycle mainly for business travel, the company can provide it as a tax-free benefit. The condition is that the bike is used mainly (over 50%) for qualifying travel, which includes commuting. This is an important distinction: unlike cars, cycling to work counts as qualifying use for the tax exemption. The bike, safety equipment, and cycling clothing can all be provided tax-free under ITEPA 2003, s244.
Bicycle mileage is claimed at HMRC's approved rate of 20p per mile for business journeys. This is a surprisingly generous rate relative to the running costs of a bicycle. If you cycle to a client meeting 5 miles away, you can claim £1 each way. While individual claims are small, regular cycling to business appointments adds up over a year.
Safety equipment provided alongside the bicycle, including helmets, lights, reflective clothing, and locks, is also exempt from BIK when provided as part of a cycling provision for business or commuting use.
Real-World Examples
Cycle to Work scheme
A director sacrifices £83.33 per month from her gross salary over 12 months to hire a £1,000 electric bike through the Cycle to Work scheme. As a 40% taxpayer with 2% employee NI, she saves £420 over the year. At the end of the hire period, she buys the bike from the company for £250 (fair market value).
Company-provided bicycle for commuting and business
A company provides its director with a £1,500 bicycle for commuting and business travel. The director cycles to the office 4 days a week and to client meetings twice a week. Since over 50% of use is qualifying journeys, the bike is exempt from BIK under the cycling exemption.
Bicycle mileage claims
James cycles to client meetings and business appointments, covering 800 business miles per year. He claims the HMRC approved rate of 20p per mile, giving him a tax-free reimbursement of £160 per year from his company.
Common Mistakes to Avoid
- Assuming the Cycle to Work scheme is not available to company directors - it is, provided you have a salary from the company to sacrifice.
- Not setting up a proper hire agreement for the Cycle to Work scheme, which is required to qualify for the tax exemption.
- Forgetting that the end-of-hire transfer price must be at fair market value, not a nominal amount - HMRC has published guidance on acceptable values.
- Claiming bicycle mileage at the car rate (45p) rather than the correct bicycle rate (20p per mile).
Frequently Asked Questions
Can a sole director use the Cycle to Work scheme?
Yes. As a director-employee of your limited company, you can set up a Cycle to Work scheme. Your company purchases the bike and you hire it through salary sacrifice. You need a written hire agreement between you and the company. Some scheme providers specialise in single-director arrangements.
Is there a limit on how much I can spend on a Cycle to Work bike?
The previous £1,000 cap was removed in 2019 for most purposes. There is no formal price limit, meaning you can get electric bikes and higher-end cycles through the scheme. However, your individual scheme provider may impose limits, and the salary sacrifice must be reasonable relative to your salary.
What happens at the end of the Cycle to Work hire period?
At the end of the hire period (typically 12-18 months), you can buy the bike from the company at fair market value, extend the hire, or return the bike. HMRC guidance suggests fair market values of 18-25% of the original price depending on the bike's age. Paying significantly less could create a taxable benefit.
Can I claim bicycle mileage for cycling to work?
No. Commuting is not business travel, even by bicycle. You can claim 20p per mile for business journeys by bike (cycling to client meetings, between business locations, etc.), but not for cycling to your regular place of work.
Does the cycling exemption cover electric bikes?
Yes. Electric bicycles (e-bikes that require pedalling and are limited to 15.5mph motor assistance) qualify for both the Cycle to Work scheme and the cycling exemption. E-scooters and faster electric vehicles do not qualify as bicycles for these purposes.
Source: HMRC Employment Income Manual EIM21664 - Cycles and cyclist safety equipment, and ITEPA 2003 s244
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