A spending cap on purchases made as part of the Cycle to Work scheme could be reintroduced in the Labour government’s upcoming Autumn Budget, according to reports – just months after the Telegraph claimed the tax-friendly initiative was being “shamelessly” exploited by “middle-aged men in Lycra earning six figures” to buy “fancy new toys”.

The Financial Times reported on Thursday that Chancellor of the Exchequer Rachel Reeves is expected to limit how much users of the Cycle to Work scheme can spend on bikes and other cycling equipment when she unveils her Budget at the end of the month.

> “Labour’s tone-deaf comments demonstrate total blind ignorance on the benefits of e-bikes and active travel”

Sources familiar with the government’s Budget preparations told the Financial Times that ministers believe that the Conservative decision to lift the scheme’s previous £1,000 cap in 2019 was not the best use of public funds, with one source concluding that “taxpayers shouldn’t be footing the bill for luxury leisure”.

Cyclists in London
Cyclists in London (Image Credit: Tomek Baginski on Unsplash)

Introduced in 1999 by Tony Blair’s Labour administration, the UK government’s Cycle to Work employee benefit scheme offers a tax-friendly initiative which enables people to buy a bike and cycling accessories through salary sacrifice, offering savings of up to 42 per cent on a full price bike for higher rate taxpayers and 30 per cent for lower earners.

Effectively, the initiative sees employees ‘loan’ a bike from their employer tax-free, initially for a year. That loan can then be extended, with employees able to eventually buy the bike at a nominal price, calculated factoring in the bike’s depreciated value over time.

During its first 20 years, tax-free purchases using Cycle to Work were nominally capped at £1,000 (though some providers did not impose this limit and former cycling minister Michael Ellis pointed out that the £1,000 ceiling never officially existed for larger employers registered with the Financial Conduct Authority).

Nevertheless, in 2019, the Conservative government announced a revamp of the Cycle to Work scheme, making it easier for bikes worth over £1,000 to be purchased using the initiative.

This formed part of a drive to increase the use of e-bikes and cargo bikes, typically more expensive than their standard counterparts, to “help tackle congestion, speed up commutes, and cut travel costs”, and to encourage families to commute by bike.

> Telegraph claims “rich, Lycra-clad cyclists tearing through red lights” are riding “hugely expensive” bikes paid for by taxpayer in “nasty” tirade against Cycle to Work scheme

That decision, however, came under somewhat belated scrutiny earlier this year, when the Telegraph published a story claiming that “middle-aged men in Lycra earning six figures” were exploiting this tax perk to buy expensive bikes.

In the article, titled ‘Rich cyclists are getting brand new bikes – courtesy of you, the taxpayer’, Ben Wilkinson argued that since the Cycle to Work scheme was revamped six years ago, it is now being “routinely abused by wealthy cyclists who have no intention of using their expensive gift from the taxpayer on their commute”.

The Telegraph’s money editor called for another rethink of the scheme, arguing that “commuters simply do not need a bike worth more than £1,000”.

“The next time you see a Lycra-clad cyclist tearing through a red light, consider this: their hugely expensive bicycle was likely paid for by you, the taxpayer,” Wilkinson wrote.

Cyclists in London talking in cycle lane
Cyclists in London talking in cycle lane (Image Credit: Simon MacMichael)

And now, that viewpoint appears to have infiltrated the Labour government, where ministers have voiced their concerns about the scheme being used to subsidise the purchase of expensive bikes predominantly used for leisure.

“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,” one government figure told the Financial Times. “Taxpayers shouldn’t be footing the bill for luxury leisure.”

It is not currently clear, however, whether the spending cap will return to the pre-2019 limit of £1,000 or whether it will be set at a higher rate to reflect the rising costs of bikes in recent years.

According to HM Revenue & Customs’ most recent data, there were around 209,000 claimants under the scheme in 2023-24, up from 167,000 in 2019-20, when the £1,000 cap was removed. The cost of the scheme also rose from £55 million in 2019-20 to £130 million in 2024-25.

“The government should leave the scheme alone or, ideally, improve the incentives rather than restrict them”

Last month, a new report commissioned by the Cycle to Work Alliance claimed that the scheme generates £573 million a year to the UK economy across retail, productivity, health, and household savings, while saving commuters over £1,200.

The report, conducted by Ortus, found that £219 million worth of bikes and accessories were purchased in 2023/24 by 199,000 employees, a figure that rose to 209,000 the following year.

Of those employees, 38 per cent were new to commuting to work by bike, demonstrating, the Cycle to Work Alliance says, the scheme’s ability to influence behavioural change.

Local transport minister Lilian Greenwood also praised the scheme, describing it as a “real success story, helping millions of people choose a healthier, greener way to travel while boosting local economies and supporting jobs”.

Cyclists in London male and female in cycle lane
Cyclists in London male and female in cycle lane (Image Credit: Simon MacMichael)

Meanwhile, another report published today by the Cycle to Work Alliance found that the scheme is worth £37 million a year to the UK economy due to reduced sickness absence and higher productivity rates, while cutting participants’ risk of heart disease by 24 per cent and cancer by 16 per cent, compared to those who commute by car.

“The Cycle to Work Scheme shows how small changes in daily life can have big impacts,” the Alliance’s chair, Steve Edgell, said in a statement today.

“Thousands of people who had never cycled before are now building activity into their routine, improving their health and wellbeing, and contributing to a stronger, more productive economy. It’s a powerful example of prevention through participation.”

> “Cycle to work schemes are sucking the lifeblood out of cycle shops”: Bike shops tell Parliamentary Committee of “need for urgent systemic change” to Cycle to Work scheme

The prospect of a new Cycle to Work cap also comes at a time when cycling retailers, and the industry in general, continue to struggle in the turbulent aftermath of the Covid-19 era bike boom.

Will Pearson, the co-owner of London-based Pearson Cycles, told the FT that any proposed limit on the scheme would need to be set at a “sensible level”, warning that it could harm progress towards encouraging more environmentally friendly travel.

“The government should leave the scheme alone or, ideally, improve the incentives rather than restrict them,” Pearson said.

“Customers are far more likely to consistently use their bikes if they are of a certain quality, reliable and efficient. This often comes at a higher price tag.”

> Does Cycle to Work still… work?

However, despite these concerns, the Cycle to Work scheme has come in for some strong criticism, both from MPs and within the cycling industry, in recent years.

In 2024, the Association of Cycle Traders (ACT) and senior representatives from the retail industry met with MPs to call for “urgent systematic change” to the scheme, arguing that it is no longer fit for its original purpose of encouraging people to commute by bike, and that cycle retailers are “currently bearing all of the cost of funding the scheme”.

And in March, the All-Party Parliamentary Group for Cycling and Walking (APPGCW) published a report calling for Cycle to Work to be rebranded “Cycle for Health” and opened up to low-income employees, freelance workers, and pensioners, as part of a wider series of reforms urgently required to tackle inequality and lack of access to active travel.

The year before, the Walk Wheel Cycle Trust (formerly known as Sustrans) and MPs united to point out flaws in the scheme, which excludes anyone who would earn less than the minimum wage of £17,000 a year once the salary deductions are taken into account, as well as those who are not in work, self-employed, or work for a non-participating employer.

The consequence of the scheme’s minimum entry point, the charity pointed out, is that just 30 per cent of people on a low income or not in employment have access to a cycle. On the other hand, data from Sustrans’ Walking and Cycling Index found that 59 per cent of people in professional occupations have access to a bike.

In response to these concerns that the initiative is “unfair”, Simon Lightwood, the Parliamentary Under-Secretary of State for Local Transport, admitted that the Labour government “absolutely recognises” there are “problems” with the current Cycle to Work scheme.