Now Labour is coming on your bike! Rachel Reeves ‘will cap spending on Cycle to Work scheme’ in brutal Budget
Rachel Reeves is planning to slash tax benefits for those buying more expensive bikes through the Cycle to Work initiative, it has emerged.
The Chancellor is reportedly poised to introduce a new cap on how much people can spend on a bicycle through the salary sacrifice scheme.
Ms Reeves is currently putting together her Budget, which will be announced on 26 November, and is scrambling to save cash and boost revenues.
It is estimated the Chancellor is facing a black hole in the public finances of between £20billion and £30billion ahead of her next fiscal package.
She has strongly hinted at a manifesto-busting rise in income tax, while there are fears Ms Reeves will also clamp down on the tax benefits of salary sacrifice schemes.
According to the Financial Times, Ms Reeves will reduce the generosity of the Cycle to Work scheme and no longer allow the purchase of more expensive bikes.
The scheme allows employees to purchase a bike and accessories with an interest-free loan from their employer.
The cost is then deducted from their gross salary in monthly payments before income tax and National Insurance is applied.
Rachel Reeves is planning to slash tax benefits for those buying more expensive bikes through the Cycle to Work initiative, it has emerged
The Chancellor is reportedly poised to introduce a new cap on how much people can spend on a bicycle through the salary sacrifice scheme
It means employees who are higher rate taxpayers save 42 per cent of the cost of the bike, while basic rate taxpayers save 30 per cent.
In 2019, the previous Tory government lifted the £1,000 price cap on bikes bought under the scheme in a bid to encourage the purchase of e-bikes, which are generally more expensive.
But there is said to be concern that some higher-rate taxpayers are now using the scheme to fund cut-price purchases of performance road bikes costing £10,000 or more.
One Government figure told the newspaper: ‘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.’
Bike manufacturers warned that significantly reducing the generosity of the Cycle to Work scheme would discourage progress towards more environmetally-friendly travel.
Will Pearson, co-owner of London-based Pearson Cycles, said: ‘The Government should leave the scheme alone or, ideally, improve the incentives rather than restrict them.
‘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.’
Senior Tory MP Richard Holden, the shadow transport secretary, said: ‘British bike makers are already being undercut by dumped Chinese imports.
‘Now Labour want to take a sledgehammer to the scheme that helps people buy from them, in turn hurting firms like Brompton and plenty of others across the country.
‘It’s a lazy cash-grab. Labour don’t have the backbone to stand up for British business and would rather make it even harder for our own manufacturers to compete.
‘Once again Labour duck the big fights and go for the easy hit.’
The Cycle to Work scheme is estimated to have cost £130million in 2024-25, which was up from £55million in 2019-20.
A Treasury spokesperson said: ‘We do not comment on speculation around changes to tax outside of fiscal events.’
