When your Cyclescheme hire period ends, you choose one of three things: Own it later (pay a refundable deposit of 3% or 7% of your certificate value, keep riding for three more years, and the bike becomes yours for that deposit), Own it now (pay the bike’s market value straight away, which after one year is 18% or 25% of the certificate value), or return it. For most people Own it later costs far less, and the reason is HMRC’s valuation table rather than any special deal. This guide covers how each option works, why the prices differ, and what happens if you leave your job part-way through.
Every Cyclescheme rule quoted here comes from the Cyclescheme Knowledge Base; the valuation percentages come from HMRC’s Employment Income Manual (EIM21667a). Terms can change, so check your own hire agreement before you decide.
The three options at a glance
| Option | What you pay | When the bike is legally yours |
|---|---|---|
| Own it later | Refundable deposit: 3% of the certificate value on packages under £500, 7% on £500 and over | After a further three years, with no other payments |
| Own it now | Market value from HMRC’s table: 18% (under £500) or 25% (£500 and over) for a one-year-old package | As soon as you pay |
| Return | No ownership fee, but you send the package back at your own cost | Never |
Cyclescheme contacts you by email, letter or SMS when your hire period ends, which is usually 12 months after you received your certificate. The message links to a payment portal where you pick an option. The fee is paid by credit/debit card or PayPal and, as Cyclescheme’s payment page explains, it cannot be taken from your salary.
Own it later: how the deposit and extended hire work
Own it later is the option Cyclescheme recommends and the one its calculators assume. You pay a small deposit, 3% or 7% of your certificate value, and carry on using the bike under an extended hire for three years. Nothing else is due during that time.
At the end of the three years, Cyclescheme asks whether you want to keep the package. If you do, it keeps the deposit you already paid as the final payment and ownership passes to you, with no further action. If you decide not to keep it, the deposit is refunded.
The catch, such as it is: for those three years the bike still officially belongs to Cyclescheme, not to you. That matters if you are thinking of selling it, giving it away or taking it apart for a rebuild. Speak to Cyclescheme before doing any of those things during the extension.
People sometimes read the confirmation email, see that their bike “officially belongs to Cyclescheme for the next 3 years”, and wonder whether they have been caught out. You haven’t. Letting an employee keep using the equipment by extending the hire, rather than transferring ownership straight away, is set out in the Department for Transport’s Cycle to Work guidance for employers (paragraph B.28), provided the tax exemption conditions are still met.
Own it now: what you pay and how it is worked out
Own it now makes you the legal owner straight away. The price is not set by Cyclescheme: it is the package’s market value, and for a one-year-old package that is 18% or 25% of the certificate value depending on whether it cost under £500 or £500 and over.
Cyclescheme’s fee calculation page sets out the method. It takes the equipment value, removes the value of any helmet, strips out VAT, applies the HMRC percentage and then adds VAT back on. Helmets are left out because they are zero-rated for VAT. In practice, a package with a helmet in it pays a slightly lower fee than the headline percentage suggests.
Why Own it later costs less: the HMRC valuation table
An employer cannot hand you the bike for £1 at the end of the scheme. If you get it for less than its market value, HMRC treats the difference as a taxable benefit. To keep things simple, HMRC publishes a table of acceptable values as a percentage of the original price, including VAT:
| Age of cycle | Original price under £500 | Original price £500 and over |
|---|---|---|
| 1 year | 18% | 25% |
| 18 months | 16% | 21% |
| 2 years | 13% | 17% |
| 3 years | 8% | 12% |
| 4 years | 3% | 7% |
| 5 years | Negligible | 2% |
| 6 years and over | Negligible | Negligible |
Source: HMRC, EIM21667a; the same table appears as Annex C of the DfT employer guidance. HMRC notes that it only applies to ordinary, widely available cycles, not antique, hand-built or otherwise special ones.
Now look at the timing. A 12-month hire followed by a three-year extension means the bike is four years old when ownership passes. Four years on HMRC’s table is 3% for bikes under £500 and 7% for £500 and over, which are exactly the Own it later deposit rates. Own it now, by contrast, transfers ownership at one year, when the value is still 18% or 25%.
That is the whole answer to “why is Own it later better?” You are not getting a discount. You are simply taking ownership at a point when HMRC accepts that the bike is worth much less.
A worked example: a £1,000 package
Take a £1,000 bike with no helmet in the package, on a standard 12-month hire:
- Own it now: 25% of £1,000 = £250, paid at the end of year one.
- Own it later: a 7% deposit = £70, paid at the end of year one, and the bike is yours three years later with nothing more to pay.
The difference is £180 on this package. If you decide at the end of the extension not to keep the bike, the £70 deposit is refunded. To see how either figure affects your overall saving at your tax rate, run your numbers through our Cycle to Work calculator, and our guide to whether the scheme is worth it folds the end-of-hire cost into the overall decision.
Returning the package
The third option is to hand everything back. You pay no ownership fee, but Cyclescheme says the return is at your own cost, so allow for packaging or a trip to arrange it. It can make sense if the bike no longer suits you and you would rather not pay anything more for it.
What happens if you leave your employer
This is where people get caught out, so it is worth reading Cyclescheme’s leaver rules carefully. They cover leaving, or being made redundant, during the hire period:
- Remaining payments come from net pay. Any outstanding salary sacrifice payments are taken from your final salary, from net rather than gross pay, with no tax saving on them. Cyclescheme’s example: on a 12-month scheme with four payments already made, the remaining eight come out of your final net pay. The hire agreement calls this a “Termination Fee”.
- You are still likely to owe an ownership fee. If you have had the tax and National Insurance saving, Cyclescheme says you are still likely to be liable for the end-of-hire payment.
- It can be waived in some early cases. Cyclescheme may waive the ownership payment if fewer than two months of deductions have been taken on a certificate under £500, or fewer than three months on a certificate of £500 or more.
- The agreement does not move with you. It cannot be transferred from one employer to another.
The DfT guidance backs up the employer’s side of this. If an employee leaves during the salary sacrifice arrangement, the employer may require compensation to cover costs it has not recovered (paragraph B.5).
If you leave after the hire period has finished and you are already on Own it later, the leaver page does not deal with that case directly. The salary deductions are complete by then and the deposit has been paid. Even so, ask Cyclescheme to confirm your position in writing rather than assuming.
Which option suits you?
- Own it later suits most people: it is the cheapest route to ownership and the deposit is refundable. The trade-off is that the bike is not legally yours for another three years.
- Own it now suits you if you want clear legal ownership straight away, for example because you plan to sell the bike, and you accept a noticeably higher fee for that.
- Return suits you only if you no longer want the bike at all.
How Cyclescheme’s approach compares with other providers is covered in our Cyclescheme vs Cycle2Work vs GCI comparison. For how the scheme works from application to certificate, see Cyclescheme explained, and for the end-of-hire rules across all providers, our end of hire guide.
Frequently asked questions
How do I choose my Cyclescheme ownership option?
Cyclescheme contacts you by email, letter or SMS at the end of your hire period, usually 12 months after you received your certificate. The message links to a secure payment portal where you select Own it later, Own it now or return, and pay any fee by card or PayPal.
Is the Own it later deposit refundable?
Yes. If you decide not to keep the package at the end of the three-year extended hire, Cyclescheme refunds the deposit. If you keep it, the deposit becomes your final payment and ownership passes to you.
Can I apply for another bike while I am on Own it later?
Cyclescheme says you may re-enrol during the Own it later period if you wish. Your employer still needs to be running the scheme, and any limits it sets still apply.
Why can’t I just pay a token amount to own the bike after a year?
Because HMRC treats a bike transferred below its market value as a taxable benefit. Its valuation table puts a one-year-old bike at 18% or 25% of the original price, which is why the cheaper route is to wait until the value has fallen.
Do I have to pay the ownership fee if I leave my job?
Usually yes, if you have already had the tax saving. Cyclescheme may waive it if fewer than two months of deductions have been taken on a certificate under £500, or fewer than three months on £500 or more. Remaining hire payments come from your final net pay.
The figures above are general information from Cyclescheme and HMRC, not personal tax advice. If your situation is unusual, check with Cyclescheme, your employer or an accountant.
