Reeves to clamp down on cycle-to-work tax perks amid surge in high-end e-bike purchases

Rachel Reeves is preparing to tighten the rules around the government’s cycle to work scheme amid a sharp rise in high earners using salary sacrifice benefits to buy premium electric bikes, some costing more than £4,000.

According to the Financial Times, the Chancellor is expected to introduce a cap on how much employees can spend on a bicycle through the scheme, with Treasury officials increasingly concerned that generous tax breaks designed to promote greener commuting are instead subsidising luxury e-bike purchases.

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, driven by higher-income professionals who can save up to 42% on the cost of a bike via salary sacrifice. With top-spec electric models regularly exceeding £3,500–£10,000, the Treasury fears the subsidy is being disproportionately captured by wealthier users and pushing the scheme far beyond its intended scope.

The cycle to work scheme, introduced in 1999, allows employees to obtain a bike and accessories via an employer-funded, interest-free loan, repaid through gross salary before tax. The cost to the Exchequer has risen from £55m in 2019–20 to £130m in 2024–25, in part due to the soaring popularity of high-end e-bikes.

The original £1,000 cap on purchases was scrapped six years ago to accommodate pricier commuting options such as cargo bikes and electric bikes. But the removal of 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 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 consistently shows that e-bikes are one of the most effective tools in reducing car usage, particularly for longer or more challenging commuter routes. Transport analysts warn that limiting access to these bikes could slow progress on reducing emissions and congestion in major cities.

EV Powered has asked the Treasury for comment.