Wealthy cyclists are set to be targeted by Rachel Reeves in the Budget with a plan to cut a tax break for buying bikes, according to reports.
It would hit cyclists who buy expensive manual and electric models under salary sacrifice schemes, many of them in London and the South East.
Ms Reeves appears to have in her sights “Mamils” - middle-aged men in Lycra - who not only cycle to work but enjoy cycling as a lesiure activity and often invest considerable sums in their bike.
Cycling has taken off in London and other regions, partly due to the increase in Mamils, some of who ride expensive racing bikes while wearing body-hugging jerseys and bicycle shorts.
Ms Reeves is set to introduce a new limit on how much cyclists can spend on a bike through the cycle to work scheme, according to The Financial Times, as part of a catalogue of tax changes in the Budget on November 26.
“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,” a Government source told the newspaper.
“Taxpayers shouldn’t be footing the bill for luxury leisure.”
If the Chancellor does restrict the cycle to work scheme, it will be another Budget measure which will hit London and the South East hardest.
The cycle to work scheme enables workers to buy a bike and accessories with an interest-free loan from their company.
Crucially, the cost is deducted from the employee’s gross salary monthly, before Income Tax and National Insurance are applied.
Higher rate taxpayers can save 42% of the bill for their bike under the scheme and basic rate taxpayers 30%.
Tony Blair’s government brought in the tax break for cyclists in 1999, and the cost of it has increased from £55 million in 2019-20 to £130 million in 2024-25.
Originally it included a cap at £1,000.
But this was ditched six years ago as it was excluding purchases of some models, including e-bikes, an increasing number of racers and cargo bikes which can carry children.
Ms Reeves, though, was warned that she risks undermining the increasing use of bikes if she imposes too tight a cap on the scheme.
Will Pearson, co-owner of London-based Pearson Cycles, which sells top of the range bikes, stressed that if a new limit on the tax break is imposed it should be set at a “sensible level”.
He 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.”
Cycling has risen in London, with the number of daily bike journeys last year hitting 1.33 million, up five per cent on 2023, and 26% since 2019.
In the Budget, Ms Reeves may also impose a new tax on electric vehicles.
"Fuel duty covers petrol and diesel, but there's no equivalent for electric vehicles. We want a fairer system for all drivers,” said a Government source.
The Chancellor is also expected to break Labour’s flagship manifesto pledge on tax, to raise Income Tax possibly by 2p partially offset by a 2p cut to National Insurance on earnings up to around £50,000.
Such a policy could mean 2.8 million higher rate taxpayers in London and the South East having to pay more to the Treasury.
Other possible new levies could include changes to pension salary sacrifice schemes, higher council tax bands for expensive properties, a mansion tax possibly on properties worth over £2 million, higher taxes on unearned income such as shares, and increased tax on accountants and lawyers who use limited liability partnerships.
The Chancellor hit Britain with £40 billion of tax rises in her first Budget last year including a £20 billion increase in National Insurance contributions for employers which was widely blamed for undermining economic growth.
She is set to launch a second huge tax raid, expected to run into the tens of billions, in the Budget as she tries to fill a large fiscal shortfall, partly due to the Office for Budget Responsibility cutting UK productivity forecasts and to build a bigger economic cushion than the current £10 billion to better protect against external shocks.
