Chancellor Rachel Reeves is reportedly considering a significant reform of the popular cycle-to-work scheme, aiming to curb its use for purchasing high-end electric bikes for recreational purposes.
The Green Commute Scheme Under Scrutiny
The government's cycle-to-work scheme, first launched in 1999, has long been a fixture for employees seeking a healthier and more environmentally friendly commute. Its popularity surged after 2019, when the £1,000 limit was removed. This change allowed individuals to utilise the salary sacrifice scheme for electric bikes valued up to £10,000.
However, the Treasury now appears to believe the initiative has strayed from its original purpose. A government insider told the Financial Times: “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.”
Soaring Participation and Cost
Data from HMRC underscores the scheme's growing uptake. The number of workers claiming under the programme jumped from 167,000 in 2019–20 to 209,000 last year. More strikingly for the Treasury, the total fiscal cost ballooned from £55 million to £130 million over the same period.
The proposed solution is not to scrap the scheme entirely, but to reintroduce a financial cap. This measure would specifically target wealthy cyclists using the tax break to buy top-tier models for leisure use, while preserving support for everyday commuters.
Broader Fiscal Pressures
This potential move occurs against a backdrop of intense speculation about how Chancellor Reeves will address a significant fiscal shortfall. Economists have warned she needs to raise between £35 billion and £45 billion by 2029-30.
Maxime Darmet, Senior Economist at Allianz Trade, highlighted the delicate balancing act, noting the goal is “to keep the target of a balanced current budget by 2029-30 without harming GDP growth, raising inflation, or shaking financial markets.” He added that major spending cuts were “unlikely for practical and political reasons.”
With Reeves having already ruled out a “return to austerity” and being forced into a U-turn on social benefit cuts, tax increases are expected to bear the weight of fiscal consolidation. Reforming tax perks like the cycle-to-work scheme could be a part of this broader strategy.