An E-bike, as in an electrically assisted pedal cycle, can be a tax-efficient means of transport. Derestrict the output and you've got a moped with very different tax and regulatory requirements. This is an issue for employers who provide E-bikes as part of Cycle to Work tax schemes as well as for regulators.
'E-bikes' or 'electrically assisted pedal cycles' (EAPC) are cycles supported by an electrical motor.
EAPCs can be a very tax-efficient method of transport.
The trouble with E-bikes is that they can easily be derestricted. Once they are powered to speeds in excess of 15.5mph, they are technically 'mopeds' or 'motorcycles' and so their tax and regulatory status changes.
There are multiple benefits to having something that qualifies as a cycle rather than a motorcycle:
- As EAPCs are not classed as motorcycles or mopeds in the UK, like traditional bicycles, they do not require registration, or tax or insurance.
- EAPC riders are not subject to the requirements to take road safety tests, although all cyclists and other road users must follow the Highway Code.
- Employers may provide cycles and EAPCs tax-free to employees under the Cycle to Work Scheme.
- EAPCs are substantially cheaper than motorcycles to run.
Similarity of treatment cycles and motorcycles:
- Like motorcycles, if a cycle is provided to an employee other than via the tax-free scheme, it will attract an annual benefit in kind tax charge. This is normally based on 20% of the VAT-inclusive purchase price.
- EAPCs and motorcycles both attract Capital Allowances if purchased by a business for employee use, or if purchased by a sole trader for business use. If the latter allowances are restricted for any private use.
Defining an E-Bike/EAPC?
An EAPC is strictly defined as a cycle which:
• Is fitted with pedals that can propel it.
• Has an electric motor with a maximum continuous rated power not exceeding 250 watts.
• Automatically cuts off electrical assistance when it reaches 15.5 miles per hour (mph).
EAPCs must be marked with important information either on a plate or on the EAPC itself.
What is not an EAPC?
An unrestricted E-bike is a motorcycle/moped for tax purposes.
A cycle can be derestricted by alteration of the cut-off. some bikes have switches to allow cut-off. The government does not regard these are EAPCs.
Grey areas
There are several 'grey areas' within the regulations and they primarily relate to:
- Powered cycles first used before January 2016: they might qualify as an EAPC: you need to check this with DVLA.
- ‘Twist and Go’ cycles (where power is provided by a twist grip and not peddles): these are an oddity. They are only EAPCs if they meet the EAPC regulations, have been type-approved by the Vehicle Type Approval Authority at the manufacturing stage and meet the 250W LPM (Low Powered Moped) category.
Useful guides on this topic
Cycle to Work Scheme
The Cycle to Work scheme permits an employer to provide cycles and/or associated safety equipment to employees tax-free.
Cycles & cyclists' safety equipment
What are the full range of tax breaks available to you and your staff if you provide your workforce with eco-travel solutions?
Salary sacrifice & optional remuneration schemes (OPRA)
What is a salary sacrifice or optional remuneration arrangement? How is it taxed?
Employment-related loans
An employer may make a tax-free loan to an employee for a sum of up to £10,000 per year. There are special rules for directors and company participators that also need to be considered.
