Understanding the Tax rules for E-Bikes and Mopeds

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Understanding the tax rules for E-Bikes and mopeds is essential for employers and riders alike. This is because it is an issue for employers who provide E-bikes as part of Cycle to Work tax schemes as well as for regulators.

Tax rules for E-Bikes and Mopeds

What Is an E-Bike/EAPC?

Electrically assisted pedal cycles (EAPCs) offer a cost-effective and eco-friendly transport solution. However, if modified or derestricted, they can become classified as mopeds or motorcycles. As a result this triggers different tax and legal requirements. 

An EAPC is a cycle supported by an electric motor. In order to qualify as an EAPC in the UK it must have the following characteristics:

  • The bike must have pedals that can propel the cycle.
  • Secondly the motor must not exceed 250 watts of continuous rated power.
  • This electrical assistance must cut off at 15.5 mph.
  • Any information must be displayed on a plate or the cycle itself.

If these conditions are met, the cycle is not classified as a moped or motorcycle. This post by the DVLA provides further details surrounding EAPC's and their rules.

Benefits of EAPCs versus Mopeds

EAPCs can offer multiple advantages compared to mopeds:

  • Firstly, like bicycles, they don’t require registration or tax.
  • Secondly, riders need only follow the Highway Code thus avoiding the expense of a road test.
  • Additionally, EAPC's are far cheaper to run than motorcycles.
  • Lastly and perhaps most importantly employers can offer EAPCs through the Cycle to Work Scheme.

Tax Treatment: Similarities Between Cycles and Motorcycles

Although EAPCs are not considered mopeds, there are some tax treatments which overlap:

  • Benefit in kind tax charge: If an EAPC is not part of a tax-free scheme, your or your employees pay tax based on 20% of the VAT-inclusive price.
  • EAPCs and motorcycles both attract Capital Allowances if they are purchased by a business for employee use. Additionally they purchased by a sole trader for business use. However in the latter case allowances are restricted for any private use.

What Happens When an E-Bike Is Derestricted?

Where an EAPC is derestricted and exceeds the 15.5 mph limit (see above) they become mopeds or motorcycles. Therefore the following changes apply:

  • The EAPC require registration, insurance, and road tax.
  • Any riders must have a driving licence and pass safety tests.
  • Your business cannot offer derestricted bikes tax-free under the cycle to work scheme.

Other issues involving E-Bike Regulations

If you have an older EAPC (specifically one used before January 2016) it might qualify as an EAPCs. However it is important to check this with the DVLA.

A twist and go cycle must meet EAPC rules, have type approval, and fall under the 250W Low Powered Moped category in order to qualify.

Summary

Understanding the tax rules for E-bikes and mopeds is crucial. Therefore it's important to understand the cycle to work scheme alongside any other tax efficient travel solutions for you and your employees.

The provision of an EAPC should also be considered in conjunction with salary sacrifice schemes and employment related loans.

E-bikes (EAPCs) can be tax-efficient, requiring no registration or road tax if they meet legal criteria, and can be provided tax-free through schemes like Cycle to Work. However, derestricted E-bikes are classified as mopeds or motorcycles, subject to stricter regulations and additional costs.

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].

Alternatively, please feel free to complete our Business Questionnaire here.

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About the author

Richard Baldwyn

I’ll help you legally pay less tax, using insider knowledge gained from my time as a former tax inspector—insight most accountants simply don’t have. More about Richard and the TFA team

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