Season Ticket Loans

What is a season ticket loan scheme? 

 A season ticket loan is an interest free loan provided by an employer to cover the cost of an employee's commuting travel pass. The employer purchases the season ticket, or advances the funds for it, and the employee repays the loan through regular deductions from their net pay over an agreed period.
This is not a salary sacrifice arrangement. The employee's gross salary stays exactly the same, and repayments are taken after tax and National Insurance have been calculated. What makes the scheme valuable is that the loan itself is completely tax free for the employee, provided it stays within HMRC limits, and it unlocks the significant discount that comes with buying annual travel rather than paying monthly or weekly.

What types of public transport are covered? 

 Season ticket loans can be used for a wide range of commuting transport, including:

Rail — annual, monthly, or weekly season tickets on commuter routes across the UK

Bus and coach — local and regional season passes

Tram and light rail — including the Tyne and Wear Metro, Metrolink, and similar networks

London Underground — Travelcards and Oyster based annual passes

Ferry — regular commuter ferry services

Multi modal passes — combined tickets covering more than one form of transport

Most employers set the scheme up for travel between the employee's home and their permanent workplace, though as a loan arrangement it is more flexible than tax advantaged schemes with strict usage rules.

How does a season ticket loan benefit the employee? 

 The value for employees comes from two places: cheaper travel and easier budgeting.

Access to annual ticket pricing — annual season tickets are substantially cheaper per journey than buying monthly or weekly tickets. Most commuters simply cannot afford the upfront cost of an annual ticket, so they pay the monthly premium instead. A season ticket loan removes that barrier.

Interest free borrowing — the employer charges no interest, so the employee pays exactly the ticket price and nothing more

Spread cost — repayments come out of pay in manageable monthly instalments rather than one painful lump sum

No tax to pay on the benefit — provided the loan stays within the HMRC exemption threshold, there is no tax charge and nothing to report

The result is the cheapest possible version of the commute the employee is already making, paid for in a way that suits their monthly budget.

How does it affect the employer?

For employers, a season ticket loan scheme is a low cost, high impact addition to the benefits package. The main cost is the temporary cash outlay of funding the tickets, which is recovered in full through payroll deductions. 

Employer benefits include:

- Improved recruitment and retention through a genuinely useful workplace benefit that employees feel every month
- Support for sustainability commitments by making public transport the easy choice over driving
- A more competitive benefits package at minimal ongoing cost
- Simple administration once the loan agreements and payroll deductions are in place
- The £10,000 limit — what limited company directors need to know
- Season ticket loans are exempt from tax and benefit in kind reporting provided the total value of all loans to a single employee does not exceed £10,000 at any point in the tax year. This threshold is set by HMRC and applies across all loans to that individual, not just the season ticket.

For most commuters, including those travelling into central London, this limit comfortably covers an annual season ticket. However, it is worth reviewing any existing loans to employees before implementing the scheme, because the exemption looks at the combined total. If the threshold is crossed, the loan becomes a taxable beneficial loan with reporting obligations, which is exactly why professional implementation matters.

Why not just use salary sacrifice?

A common question, and an important one. HMRC's optional remuneration rules mean that sacrificing salary for ordinary commuting costs does not produce a tax saving. The arrangement would be taxed as though the employee had received the salary anyway. Only a small number of benefits, such as pensions and cycle to work, retain their tax advantages under salary sacrifice, and everyday commuter travel is not one of them.

That is why the interest free loan is the established, HMRC compliant route for helping employees with travel costs, and why getting the structure right from the start matters.

What to expect when setting up a scheme?