The cycle to work scheme is not available to the self-employed. It runs through salary sacrifice on a PAYE payroll — something sole traders simply do not have. If you are self-employed and looking to buy a bike for commuting or work, here is what you can and cannot do.
How the scheme works — and why it excludes sole traders
The cycle to work scheme is an employer-provided benefit. Your employer signs up with a scheme provider, loans you the bike, and deducts the repayments from your gross salary before income tax and National Insurance are calculated. Because you are paying for the bike out of pre-tax pay, you spend less than if you bought it outright. You can read a full explanation in our guide to how the cycle to work scheme works.
That structure depends on two things: a regular PAYE salary, and an employer willing to set the arrangement up. The detailed eligibility rules make both requirements explicit — your employer must offer the scheme and your earnings after the salary sacrifice deduction must not fall below the National Minimum Wage.
As a sole trader, you do not receive a PAYE salary. You report your profits to HMRC through Self Assessment and pay income tax and National Insurance once a year. There is no gross salary to sacrifice, and no employer to run the scheme. Cyclescheme, one of the largest UK providers, states this plainly on its eligibility page: without a PAYE salary, “you’re unable to take part in a cycle to work scheme.”
This is not a loophole or a technicality that can be worked around. The tax exemption in ITEPA 2003 applies to an employer lending a cycle to an employee. As a sole trader you are neither, so the exemption simply does not apply.
What self-employed people can do instead
Being excluded from the cycle to work scheme does not mean you cannot reduce the cost of a work bike through the tax system. The route available to you depends on how you account for your income.
Traditional (accruals) accounting
If you use traditional accruals-basis accounting, a bicycle bought for business use is a capital item. It may qualify for the Annual Investment Allowance (AIA), which currently allows 100% relief on qualifying purchases in the year you buy, up to £1 million. The deduction must be reduced to reflect private use: if the bike is used equally for business and personal journeys, only 50% of the cost qualifies.
HMRC generally treats commuting to a fixed regular workplace as private use. If the main purpose of the bike is getting to and from the same base every day, the business-use proportion may be very limited.
Cash basis accounting (the default from 2024/25)
Since the 2024/25 tax year, cash basis is the default accounting method for most sole traders. Under cash basis, capital allowances do not apply to bicycles (cars are the exception). That said, you may still be able to deduct the purchase cost directly as a business expense in the year you pay for the bike — again, proportioned to actual business use.
If you are unsure which accounting method you are using or how private use affects your claim, HMRC’s guidance is a useful starting point, but an accountant can give you a clear answer based on your specific circumstances.
No simplified mileage rate for bicycles
HMRC’s simplified expenses scheme lets self-employed people claim a flat rate per mile for cars (45p per mile for the first 10,000 business miles) and motorcycles. There is no equivalent rate for bicycles. If you use a bike for business travel, you cannot use a per-mile deduction — you would need to claim actual costs (purchase price, maintenance, insurance) proportioned to business use.
Company directors: a different situation
If you operate through a limited company rather than as a sole trader, your position may be different. A director who is also employed by their own company and paid via PAYE is technically an employee for the purposes of the scheme. Your company could formally set up a cycle to work arrangement — through providers such as Cyclescheme, Cycle2Work, or GCI — and you could participate as an employee director.
Your company would loan you the bike and deduct the repayments from your director’s salary before PAYE. The company also benefits from paying less employer’s National Insurance on the lower gross salary. Whether the administrative effort of setting this up is worthwhile for a small limited company is a question for your accountant.
Is the saving still meaningful?
For sole traders, the tax saving is smaller than it is for PAYE employees. An employee using salary sacrifice saves income tax and National Insurance on the sacrificed amount. A sole trader claiming a bike through their accounts only reduces their taxable profit, saving tax at their marginal rate — 20% for basic-rate taxpayers, 40% for higher-rate.
That is still a real saving. A basic-rate taxpayer buying a £800 bike and claiming it as a business expense (assuming full business use) saves £160 on their tax bill — buying the bike for an effective cost of £640. It is not the full benefit employees get, but it is not nothing.
If you are comparing your options honestly: the cycle to work scheme is designed for the employed. If you are self-employed, the scheme is closed to you, but the tax system does give you a mechanism to reduce the cost of a work bike. The size of that saving depends on your accounting method, your tax rate, and how much of the bike’s use is genuinely for business.
Frequently asked questions
Can a sole trader use the cycle to work scheme?
No. The scheme requires salary sacrifice through PAYE. Sole traders pay tax via Self Assessment and have no PAYE salary to sacrifice, so they cannot participate in any employer-run cycle to work scheme.
Can a self-employed person claim a bicycle as a business expense?
Possibly. Under traditional accounting, a business bicycle may qualify for the Annual Investment Allowance (100% in the year of purchase, proportioned to business use). Under cash basis accounting (default since 2024/25), capital allowances do not apply to bikes, but you may be able to deduct the cost directly. Check HMRC guidance or speak to an accountant for your specific situation.
Is there a mileage rate for self-employed cyclists?
No. HMRC’s simplified expenses cover cars and motorcycles only. For business use of a bicycle, self-employed people must claim actual costs — there is no flat per-mile rate equivalent to the car rate.
Can a company director use the cycle to work scheme?
Potentially yes, if the director is also employed by their own limited company on a PAYE salary. The company would need to formally adopt the scheme with a provider. This is different from operating as a sole trader.
