The Cycle to Work scheme is simple until the hire period ends — and that is exactly where people get confused. The bike has been yours to ride for a year, but technically you have only been hiring it. So what happens next, and what does it cost to actually own it? This guide explains the options in plain English, with the real HMRC figures.
Why there is an “end of hire” at all
Throughout the hire period the bike legally belongs to your employer (or the scheme provider), and you pay to hire it from your gross salary. That hire arrangement is what makes the tax saving legal. When it ends, the bike is not automatically yours — ownership has to be dealt with separately, and HMRC is strict that it must happen at a fair price, or the tax saving would be undermined.
Your three options at the end
- Pay to own it now. You buy the bike from the scheme at its “fair market value” (see below). Quick and final, but the upfront payment can be a noticeable chunk.
- Extended hire (the common route). You pay a small refundable deposit — typically a few per cent of the bike’s price — and keep using the bike for an extended period of up to several years at no further cost. By the end of that extension the bike’s fair market value has fallen close to nothing, so ownership effectively transfers for the deposit you already paid. This is how most providers keep your saving high.
- Hand it back. You return the bike and pay nothing more. Rare, but it is an option.
What “fair market value” actually means
HMRC publishes a simplified valuation table so the ownership price cannot be set artificially low. The value is a percentage of the bike’s original price, and it falls with age. For a bike that originally cost £500 or more:
- after 1 year: 25% of the original price;
- after 3 years: 12%;
- after 5 years: 2%.
For equipment that cost under £500, the figure is 18% after one year, falling to 3% after four years. This is why the extended-hire route is popular: wait a few years and the value — and so the cost to own — drops to almost nothing.
So on a £1,000 bike, buying it outright after one year would cost around £250, which would wipe out a basic-rate taxpayer’s saving. Take the extended-hire route and you pay a small deposit instead, and own the bike once its value has dropped years later.
How this changes whether the scheme pays off
The end-of-hire cost is the single biggest variable in whether the scheme is good value. A generous provider using the deposit-and-extend model leaves almost all of your tax saving intact. A provider that asks for the full one-year fair market value upfront takes a big bite out of it. That is why we always say: find out your provider’s end-of-hire terms before you sign up. Our provider comparison shows how the main three differ, and our is it worth it? guide folds this cost into the overall picture.
Practical tips
- Ask your provider, in writing, exactly what you pay at the end and when.
- If they offer extended hire, take it unless you have a reason not to — it is almost always the cheapest path to ownership.
- Keep the deposit receipt; with extended hire it is what eventually counts as your ownership payment.
- Remember the figures above are set by HMRC, not your employer, so a provider cannot legally sell you the bike for a token £1 after one year.
Frequently asked questions
How much does it cost to keep the bike at the end of Cycle to Work?
It depends on the route. Buying it outright uses HMRC’s valuation table — for example 25% of the original price after one year on a bike costing £500 or more. Most people instead pay a small refundable deposit and take extended hire, so they end up owning the bike for a few per cent of its price once its value has dropped.
Why can’t my employer just give me the bike for £1?
Because HMRC treats a bike sold below its fair market value as a taxable benefit. The published valuation table sets the minimum acceptable price, which is why providers use the extended-hire model rather than a token payment.
What is extended hire?
You pay a small refundable deposit and keep using the bike for an extended period, usually up to a few years, at no extra cost. By the end the bike’s fair market value is negligible, so ownership effectively passes to you for the deposit you already paid.
Do I have to keep the bike?
No. You can return it at the end of the hire and pay nothing further, though most people want to keep the bike they have been riding.
In short
The end of hire is not a catch so much as a step to understand. Take the extended-hire option where it is offered, know HMRC’s valuation figures, and the scheme keeps almost all of its value. Run your own numbers in the Cycle to Work calculator and check whether it is worth it for you.