A season ticket loan is an interest-free loan provided to employees to help cover the cost of commuting to and from work using public transport, such as trams, rail, or buses.
The loan is repaid monthly through deductions from the employee’s net pay over a set period. Paying for a season ticket directly through a vendor, rather than via salary deductions, can often be more expensive due to interest charges. This scheme allows employees to benefit from a lower annual fee while spreading the cost over time.
Employers have the flexibility to determine the repayment period, ensuring the scheme works effectively for both the employer and the employee.
Flexi-Season Tickets for Hybrid Workers
Flexi-season tickets have been introduced in response to the hybrid working model. These tickets help hybrid workers manage travel costs when commuting on an occasional basis.
Season Ticket Loan Eligibility Criteria
To qualify for a season ticket loan, employees must:
- Be a salaried employee
- Have employment extending beyond the season ticket’s expiry date (e.g. a minimum of 12 months)
- Earn enough to cover the monthly instalments
Tax Implications
- If the total value of all loans provided to an individual is less than £10,000 (as is the case with most season ticket loans) and not offered under an optional remuneration arrangement (salary sacrifice), no benefit needs to be reported.
- If a season ticket loan is written off as part of a redundancy or other employment termination settlement, it is taxable as earnings, and the tax-free exemption for termination payments does not apply.
