The Cycle-to-Work Scheme allows an employer to provide a tax-free benefit to an employee, however it is not mandatory for an employer to offer the scheme. 

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Some employers may offer a ‘salary sacrifice’ type arrangement, whereby part of an employee’s salary is foregone to pay for the bike, while others may not require repayment of the amount paid for the bicycle. Where an employer pays for the bike entirely without a salary sacrifice arrangement, the benefit will be completely tax-free up to the relevant limits as listed below. If your employer provides a salary sacrifice arrangement, you may repay the company over a maximum 12-month period. The benefit is that the repayments are taken from your gross salary, and as such you will only pay tax on the gross salary less the monthly repayment amount. See the example below. The benefit is not limited to the bike itself but may also include the necessary safety equipment. Any equipment required to carry a child on the bike is not included.

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From 1 January 2023, the non-taxable benefit (including safety equipment) is limited as follows:

1. €3,000 on Cargo or eCargo bikes
2. €1,500 on eBikes
3. €1,250 all non-electric bikes (except for Cargo bikes)

At this time the scheme is limited to bicycles and specifically excludes scooters or mopeds etc. The bike must be purchased new, and the scheme cannot be used to pay for replacement parts of any bicycle. As mentioned above, the scheme covers safety equipment, however, it must form part of the same transaction i.e. purchased with the bike. Items such as lights, reflective clothing, cycle helmets, bike locks, puncture repair kits etc. all fall into the bracket of safety equipment. The bike should be for your own use and be used mainly for commuting from your home to your usual place of work. The scheme may be availed of every 4 years. 

Example:

Mary’s wishes to purchase an e-bike for €1,300, her employer offers a salary sacrifice arrangement. Mary’s employer will pay for the bike and Mary has decided to pay for the bike over 10 months (rather than the 12-month maximum). Mary has a marginal rate of tax of 52% and her gross monthly salary in €5,000.

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As Mary’s marginal rate of tax is 52%, the actual cost of the bike to Mary is €62 per month although she will pay €130 from her gross salary each month. The cost of the bike to Mary is only €620, while the cost of the bike had Mary not availed of the scheme would have been €1,300.