Cycle to work scheme

bikes and flowers What is the scheme?

The Cycle to Work Scheme allows eligible employees the tax-free hire of bicycles and related safety and security equipment. The scheme operates through a Government initiative aimed at getting more people to cycle to work.

The scheme allows staff to hire a bicycle (and safety and security equipment) from the University up to the value of £1,000 (incl. VAT) over a 12 month period.

The scheme requires eligible staff to enter into a salary sacrifice agreement during the hire period which allows Income Tax and National Insurance contributions savings to be realised.

The schemes will be open for applications during April, June and October.  The University intends to run the scheme on an annual basis and will therefore have a windows for applications each year.

Key considerations

Bicycles and/or safety equipment hired through the scheme should primarily (more than 50% of the time) be used for ‘qualifying’ journeys.  This means a journey or part of journey:

  • Between your home and work place;
  • Between one workplace and another;
  • To and from the train station to get to work.

However the bike can also be used for non-work journeys.

Certain eligibility requirements must be met to qualify for participation in the scheme.

The salary sacrifice agreement will be effective for the duration of the hire period. After a 7 day “cooling-off period after signing the hire-contract, the contract is irrevocable.

If an employee leaves the University before the end of the hire period the outstanding balance will be deducted from the employee’s final salary. This will be a deduction from net salary (i.e. without any tax relief).

It will be the employee’s responsibility to maintain and insure the bicycle. If a bicycle is stolen during the hire period the employee will still be required to make the remaining payments.

To be eligible you must:

  • be an employee of the University (with a contract in place for at least the duration of the hire period but this scheme is not open to employees on probation),
  • earn more than the National Minimum Wage after salary sacrifice,
  • be aged 18 or over (Under 18s can join the scheme if their guardian signs a guarantor agreement),
  • intend to use the bike primarily for commuting to work.

There is no credit check for employees wishing to participate in the scheme.

Salary sacrifice occurs when an employee agrees to give up part of their salary for an agreed period (in the case of the Cycle to Work scheme this is 12 months) in exchange for a non-cash benefit, such as the loan of a bicycle and safety equipment.

As salary sacrifice is taken from the gross salary (before tax) rather than net salary it means the employee pays less income tax and National Insurance.


Here’s an example of how the savings work during the hire period, assuming the following:

  • Employee is paid monthly,
  • Employee is a standard rate tax payer hiring a bike and safety equipment to the value of £500 (incl. VAT),
  • The hire period is 12 months,
  • The employee’s monthly gross salary is £1,200.00 (£14,400 per annum).

Before Scheme Participation 


Monthly Gross Salary (before tax and NI deductions)


Monthly National Insurance contribution (12%)


Monthly income tax contribution (20%)


Monthly Net Salary (after tax and NI deductions)


During Scheme Participation


Bike value including VAT


Monthly Gross Salary Sacrifice

£500 / 12 months = £41.66

Monthly Gross Salary after salary sacrifice (before tax and NI deductions)

£1,200.00 minus £41.66 = £1,158.34

Monthly National Insurance contribution (12%)


Monthly income tax contribution (20%)


Monthly Net Salary (after tax and NI deductions)



(i.e. difference between net salary before scheme participation and net salary during scheme participation)

£816.00 minus £787.67= £28.33


In this example, the employee makes a contribution of £41.66 to the employer, but it only costs them £28.33, resulting in a saving of £13.33 per month.


£41.66 minus £28.33 = £13.33

Step 1. Employees considering participating in the scheme should contact Karen Beeston, HR Advisor, ( or ext 33404) to check they meet eligibility requirements.

Step 2. The University is partnered with Halfords Cycle2work. Employees wishing to participate in the scheme should visit a local Halfords or other partner supplier (for store locator go to to choose a bike and, if required, safety equipment to a maximum of £1,000 including VAT.  Please note that safety equipment includes items such as lights, reflective strips, reflective clothing, and helmets, but not cycle computers or waterproof clothing.

Step 3. Employees then apply for a Cycle2 work ‘Letter of Collection’ via Halfords using the unique Keele reference KEELEUNIC2W. The employee will usually sign an online Hire Agreement at this time. The hire agreement does not become effective until it has been countersigned by the University.

Step 4. The University will check the application to ensure the employee meets the eligibility requirements (see Question 1 above) and if approved will countersign the Hire Agreement and pay Halfords for the full retail price of the bike and equipment.

Step 5. Cycle2work will also generate the ‘Letter of Colllection’ which will be passed to the employee electronically. The University will be notified and the salary sacrifice scheme will commence from the next available Payroll processing schedule/run after the notification is received. This will apply even if the employee has not yet redeemed the certificate.

Step 6. The employee redeems the Letter of Collection at the bike shop and exchanges it for the bike package.

Step 7. At the end of the initial 12 month hire period Cycle2work will contact the employee to discuss options concerning ongoing use of the bike. 

Step 8. Employees also benefit from ongoing loyalty discount with 20% off accessories for 12 months.

£1,000 inc.VAT.

The bike and equipment remain the property of the University throughout the hire period.

It is the employee’s responsibility to maintain and insure the bike. If the bike is stolen then you have effectively left the scheme and you will need to pay all outstanding monies from your net salary. You will be required to pay Cycle2work an amount for full market value of the bike unless you can evidence the bike being stolen with a crime reference number.

Cycle2work provides free 12 month maintenance and servicing plan for bikes sourced from Halfords shops with free 6 week safety check.

Employees should use the bike primarily for commuting to and, if relevant, between workplaces (at least 50% of the bike’s use should be for work purposes). However, the bike can also be used for non-work purposes.

Please note that employees cannot claim business mileage allowance with a bike that is being hired to them by their employer.

At the end of the initial 12 month hire period Cycle2work will contact employees under the salary sacrifice scheme to discuss the return of the bike to Cycle2work, or to discuss options concerning ongoing use of the bike.

These may include an option of ‘extended use’ under a Managed Extended Hire in which Halfords will take ownership (but not possession) of the bike and arrange an extended hire until the fair Market Value of the bike is negligible. The employee will have nothing more to pay.

Once signed, the Hire Agreement is non-cancellable following a cooling-off period of 7 working days following collection of the goods. This means that if an employee leaves or is made redundant from their employment during the hire period they are obliged to pay the remaining salary sacrifice amount in full from net pay (i.e. without any tax relief).

If applicable, the employee may then be offered ownership of the equipment in the normal way (please see Question 8 above).