Cycle to Work Scheme 2026: How Ownership and Fair Market Value Payments Work

The scheme is a hire agreement, not a purchase

The Cycle to Work scheme lets employees get a bike (and safety equipment) through salary sacrifice — the cost is deducted from gross salary before tax and National Insurance, reducing the effective cost of getting a bike compared to buying one outright with take-home pay.

What happens at the end of the hire period

Hire periods are commonly 12 to 18 months. At the end of that period, if you want to keep the bike, you typically need to pay its Fair Market Value (FMV) — essentially what the bike is genuinely worth secondhand at that point — to formally take ownership.

This requirement exists because if you were simply handed a bike worth hundreds of pounds for nothing (or a token amount), HMRC could treat the difference between what you paid and the bike's real value as a taxable benefit in kind, undoing much of the tax efficiency the scheme is designed to deliver.

HMRC's simplified valuation tables

To avoid every employer needing an independent valuation for every bike, HMRC has published simplified valuation percentages — expressing FMV as a percentage of the bike's original price, varying by:

• The original value of the bike (cheaper bikes generally attract lower FMV percentages than more expensive ones at the same age).
• The age of the bike at the point of transfer (the longer the hire period, the lower the FMV percentage, reflecting ongoing depreciation).

Employers can use these simplified percentages instead of commissioning a bespoke valuation, provided the bike falls within the scope HMRC intends the tables to cover. For higher-value bikes or unusual circumstances, employers may instead use an independently justified valuation.

Worked example: a £1,000 bike

Illustrating how the FMV mechanism typically plays out for a bike with an original price of £1,000:

The general pattern to understand, rather than memorise exact percentages: the longer you've hired the bike, the lower the Fair Market Value, and therefore the lower the payment needed to take ownership. A bike hired for 18 months will generally have a lower FMV than the same bike hired for only 12 months, because it has depreciated further.

Why the price band matters

HMRC's tables generally apply higher FMV percentages to more expensive bikes at the same age than to cheaper ones, reflecting that more expensive bikes tend to hold a larger proportion of their value on the secondhand market at a given age. This means someone who sacrificed salary for a premium bike may face a proportionally (and often absolutely) larger final ownership payment than someone with an entry-level model, even at the same hire duration.

Alternatives to a final ownership payment

Because the FMV payment can come as a surprise to employees who assumed the bike was "theirs" once the hire period ended, some employers and scheme providers structure things differently:

• Extended hire period: rather than requiring an ownership payment at 12 months, the bike continues to be hired (often at a nominal or reduced ongoing cost) for a longer period, so that by the time ownership transfers, the FMV has fallen closer to a token amount.
• Employer-absorbed transfer: in some cases, employers choose to cover or subsidise the final FMV payment themselves as an added staff benefit — though this may itself have tax implications depending on how it's structured.
• No transfer, ongoing hire: some employees simply continue hiring rather than ever taking formal ownership, if their employer's scheme allows this.

Practical takeaways for employees

• Understand before you sign up that a bike acquired via Cycle to Work isn't automatically yours at the end of the hire term — budget mentally for a possible final payment.
• Ask your employer or scheme provider what happens at the end of the hire period under their specific scheme — extended hire, FMV payment, or another structure.
• If a final payment is required, expect it to be a genuine reflection of the bike's secondhand value, not a nominal fee — cheaper, older bikes will cost less to keep than newer, pricier ones.

The bottom line

The tax and National Insurance savings from Cycle to Work are real and can meaningfully reduce the cost of getting a bike through salary sacrifice — but the scheme is a hire arrangement, and taking ownership at the end typically means paying the bike's genuine Fair Market Value based on HMRC's guidance. Understanding this upfront avoids any surprise at the 12- or 18-month mark, and checking your specific employer's approach to extended hire or transfer terms can help you plan the true final cost of the bike.