Do You Pay Tax On A Seasonal Ticket Loan?
By
HuutiMoney
If you are wondering whether or not you need to pay tax on a season ticket loan, you will find the answer to this question in the following blog post where we will discuss season ticket loans and their implications in detail.
Do You Pay Tax On A Season Ticket Loan?
No, you don’t have to pay tax on a season ticket loan if the amount does not exceed the threshold of £10,000. Seasonal ticket loans exceeding the £10,000 threshold are treated as benefits in kind and are therefore taxed accordingly.
The purpose of a season ticket loan is for employers to cover their employees’ expenses for daily commutes to and during work by providing them with vouchers for public transport. Since season tickets fall under the category of entertainment as per Regs. Sec. 1.274-11(b)(1), their cost is not tax deductible.
However, if you received a season ticket loan in the form of cash or the amount is reimbursed along with your next salary, you may have to pay tax on it. The reason for this is that when your employer reimburses you with an additional amount added to your salary, it indicates an increase in your income which is taxable.
In either case, the details of your season ticket loan should be reported to the HMRC and will be mentioned on your P11D form. This includes the following situations:
- you receive season tickets from your employer
- costs of season ticket costs reimbursed by the employer
- loans extended by employers to purchase season tickets
- contributions by the employer for subsidised or free public bus transport
Who Is Eligible For A Season Ticket Loan?
The eligibility criteria for a season ticket loan depends on the organisation extending this offer to their employees. However, in most cases, employers tend to have the following common criteria:
- you should be a full-time salaried employee
- you have at least 12 months remaining on your employment contract
- your net monthly salary should be sufficient enough to cover the cost of a season ticket loan
Employee applications for a season ticket loan are directly received by employers; usually through an online form on their website.
How Are Season Tickets Treated For NIC?
In the case of your National Insurance Contributions, the treatment of season tickets is slightly different than PAYE tax. According to the National Insurance Manual, the following are the instructions for employers in case of season tickets are offered to employees:
- if an employee receives a season ticket for a normal home-to-office journey, its payment will be included in gross pay for Class 1 NICs.
- if an employee gets reimbursement for the cost of a season ticket, its payment will be included in gross pay for Class 1 NICs.
- if an employee received money to buy a season ticket, its payment will be included in gross pay for Class 1 NICs.
- if an employee takes a loan to buy a season ticket, there is no Class 1 NIC liability. However, if, the employee is unable to repay a part of the loan, the amount will be considered as earnings for Class 1 NICs.
Conclusion:
The above discussion helps to conclude that employees are not required to pay tax on a season ticket loan as long as it remains within the threshold of £10,000. However, employers should make sure that they report the season ticket loan in the P11D form of each employee who gets a season ticket loan.
References:
Expenses and benefits: public transport: What to report and pay – GOV.UK