Essentially, your employer buys a bike of your choice up to £1000 to allow you to ride to work. You ‘hire’ it from them by making monthly payments from your salary. When the agreed ‘hire’ period comes to an end, you have the option to buy the bike from your employer. You can also use the scheme to purchase clothing and equipment as long as it falls within the agreed amount.
Your monthly payments are paid from your gross salary (before tax), therefore reducing your income tax and national insurance. At the end of the ‘hire’ period you can either return the bike to your employer; pay the fair market value (usually around 18-25% of the RRP), or pay a small fee to re-hire the bike for a further three years, after which the bike becomes yours for free.