Complete Guide To UK Season Ticket Loan Schemes 2024

How Does A Season Ticket Loan Work?

An employee has to apply for a season ticket loan through their employer. Typically, this is done via a benefits platform such as My.Drewberry, or by submitting an application form. When applying, the employee needs to share information about their commute, such as the route and the cost of the season ticket.

It’s then down to you, the employer, to review the application and approve it. You can provide a season ticket loan in several ways, including:

• Purchasing it on behalf of the employee
• Providing the cash value of the season ticket to the employee to purchase it themselves.

Employees can typically request a season ticket loan up to the value of £10,000, but this depends on the organisation. It’s an interest-free loan, so the employee doesn’t pay any interest on the ticket. Since no interest is accrued, the loan is more financially attractive to staff.

The employee can use their season ticket for daily commuting, enjoying the benefits of unlimited travel within the ticket’s validity period and route.

How you offer the scheme is up to you. There are a number of options such as offering an interest free loan. Or you can set up the scheme via salary sacrifice.

If unsure what option is right for you, it’s best to speak to an expert like one of the team at Drewberry. Pop us a call on 02074425880 or email help@drewberry.co.uk.

Nadeem Farid
Head of Health & Wellbeing Benefits

What Modes Of Travel Are Covered?

There are a number of travel modes covered. For example, rail, tram and bus. When it comes to rail travel, an employee can get a season ticket, which allows them to travel for most short and medium distance journeys. However, the season ticket is only to be used on trains between their home and the workplace.

For other modes of transport, such as buses or tram travel, season tickets are normally only available within a set area of the UK.

For example, a worker living in Brighton (where our office is located) will only be able to buy a season ticket for buses within the catchment area. So, for hybrid workers who live further away from the workplace, a season ticket might not be the best option.

Flexi-Season Tickets For Hybrid Workers

Flexi-season tickets have been introduced off the back of new hybrid ways of working. These aim to help hybrid workers cover the costs of travel on an occasional basis.

For example, National Rail offers flexi-season tickets that enable workers to travel by rail for 8 days out of 28 days. They don’t have to choose their travel days in advance, offering more flexibility over their schedules.

How Do Employees Pay Back The Season Ticket Loan?

Once the ticket is purchased, payroll will start to deduct the cost of the loan each month from the employee’s net pay. The employee then pays back the loan over a 10-12-month period, helping to spread out the cost of the ticket. They can typically decide how long they pay back the loan for.

At the end of the loan period or the season ticket expires, the employee can renew the scheme and apply for a new loan. Or they can simply decide not to renew.

Season Ticket Loan Eligibility Criteria

For your employees to qualify for a season ticket loan, they must:

• Be a salaried employee
• Have an employment that exceeds the expiry date of the season ticket (e.g. a minimum of 12 months)
• Earn enough to cover the monthly instalments.

Outside of these core criteria, you can set your own criteria for employees. For instance, they may need to pass their probationary period before becoming eligible for a season ticket loan.

Joseph Toft
Senior Consultant, Employee Benefits

Benefits Of Season Ticket Loan Schemes For Employers

For you, implementing a season ticket loan scheme for your employees is beneficial, as it helps to:

Increase Employee Retention

A comprehensive employee benefits package can make all the difference when it comes to keeping your top talent. While salary is an important aspect, the benefits you provide to staff play a huge part in retaining them. If you show your team you care about their wellbeing, they’re likely to be happy, productive, and engaged at work.

Alongside benefits, such as Workplace Pensions, Company Health Insurance, and Group Life Insurance, travel benefits are becoming popular. Season ticket loans help to reduce any money woes an employee has because of the high price of travel. Considering 43% of UK employees say money worries are a major stressor, providing financial support where you can is helpful.

Enhance Recruitment Efforts

Season ticket loans can help you with your company’s recruitment. Since employees don’t have to pay for their season ticket upfront, job-seekers are likely to find this perk more attractive. An interest-free loan helps them to spread out the full cost.

This can then give you an advantage over your competitors, showing new hires that you care about more than their performance. You care about their financial health, too. Many employees use a large portion of their income to cover their commutes. So, by offering this kind of financial support, your staff will value you as their employer.

Positively Impact Company Culture

Happy staff create an engaged and productive work environment. And your employee benefits can make a big difference to workplace happiness.

If they’ve got one less thing to worry about, a season ticket scheme can help to improve the financial wellbeing and happiness of your staff. As part of a comprehensive benefits package, it may have a positive impact on your company’s culture.

Become A More Sustainable Business

Offering season ticket loans to your employees can support eco-friendly practices. Travelling via public transport as opposed to driving to work helps to reduce how many vehicles are on the road.

So, providing this benefit looks good on you as the employer. It can even contribute to companies wanting to achieve B Corp status. This is a status awarded to businesses with high social and environmental performance.

Benefits Of Season Ticket Loans For Employees

Providing season ticket loans to your team has several benefits, including:

Reduced Commuting Costs

The cost of commuting often takes a significant chunk out of an employee’s annual salary. An employee who attends their workplace 5 days a week spends on average £2,685.60 a year on their commute. For many, this amount is more than one month’s salary.

A season ticket loan helps to relieve the financial pressure of high travel costs. An annual ticket costs less than the total amount an employee would pay if they were to buy tickets daily. Annual tickets are also cheaper than buying a monthly travel ticket (you can see the cost differences between the two below).

It also allows staff to save time on their commute. Since they already have a ticket, they don’t need to worry about being stuck in a queue to buy one before travel.

Help Support Hybrid Work

Changes to how we work (such as a mix of working from home and office work) has prompted employers to re-think their benefits offerings. As a result, many are now introducing commuting benefits. It encourages staff to attend the office more often without any financial pressure.

A season ticket loan scheme offers more financial flexibility. Your employees will benefit from reduced travel costs, leaving more money in their pocket. By implementing this scheme, you’ll tackle a key challenge for many workers.

Offering A Greener Method Of Travel

More and more people in the UK are seeking ways to reduce their carbon footprint. Their commute to work being one they can make more eco-friendly.

A season ticket loan enables staff to use more sustainable transport without worrying about their finances. Travelling to work via public transport reduces the number of vehicles on the road. What’s more, many commuter vehicles are now electric or hybrid models, which support the eco-initiative even further.

How Much Do Season Ticket Loans Cost?

There aren’t any costs for employers when setting up a season ticket loan scheme. However, as a business, you need to ensure offering loans to employees sits within company finances. While you will get the loan amount back, it’s important to consider how the initial loans may make a dent in the accounts.

Types Of Travel

The actual cost of a season ticket depends on the type of travel the employee uses. Travelling by train, for example, is known to be expensive, especially if you’re travelling at peak times. You can see an example of rail travel costs below.

The price of commuting to work on a bus depends on their location. In most county’s the area is split into zones, which determine distance and cost. Ultimately, how much a season ticket costs depends on how a person travels and where they’re travelling to.

Example Train Season Ticket Costs

For rail travel, the purchase price of a season ticket depends on:

• The two stations the employee will travel between
• How many days a week the ticket is needed
• Whether it’s standard or first class travel
• The duration of the season ticket
• If the employee has an active railcard.

Here are some examples of cost, assuming that:

• The ticket is for standard travel and lasts for a year
• The employee travels 5 days a week between two stations
• The employee doesn’t have a railcard.

We’ve calculated the cost of an annual season ticket compared to a monthly ticket.

While the example costs may seem expensive initially, it’s important to remember the employee pays it back over 10-12 months. The money always comes back.

These are example costs for a season ticket for rail travel. As you can see, purchasing an annual ticket comes with a significant saving, compared to buying a monthly ticket.

How Does HMRC View Season Ticket Loans?

How HMRC view Season Ticket Loans will depend on how you set your scheme up. We’ve outlined some of the different scenarios below.

Beneficial Loans

If you provide employees with a ‘Beneficial Loan’, which is a loan that is interest free, or at a rate below HMRC official interest rate, repayments from the employee are made from their net pay, after tax and National Insurance Contributions (exception limits apply to beneficial loans).

No tax is chargeable if the total balance outstanding on all beneficial loans does not exceed £10,000 throughout the year of assessment in question (this exemption does not apply where the loan is given through OpRA).

Are Season Ticket Loans A P11D Benefit?

Whether the season ticket loan scheme counts as a P11D benefit depends on how you set up the benefit for employees.

If you cover the cost of a season ticket upfront and provide it as a ‘Benefit in Kind’, the amount is subject to Class 1 National Insurance Contributions (NIC) in payroll. In this case, it’s taxable as part of P11D, unless you payroll your benefits.

If the employee buys the ticket and you reimburse the cost, this counts as earnings. This applies if you reimburse the full amount or cover the costs with allowance or salary increase. In this scenario, the cost is added to your employee’s other earnings. Then PAYE tax and Class 1 National Insurance are deducted and paid through payroll.

Salary Sacrifice

If you offer a season ticket loan scheme via the salary sacrifice set up, this may fall under OpRA rules. The amount sacrificed by the employee is subject to tax and the employer is obliged to pay Class 1A NIC. The employee saves by not paying any employee National Insurance.

We know it can be confusing when setting up the scheme in the right way for your business. It’s best to speak to your accountant to ensure you’ve organised the benefit correctly.

Matthew Brown
Consultant, Employee Benefits

Implementing A Season Ticket Loan Scheme

To provide a season ticket loan scheme, you will need to create an employee benefits policy which details the rules of the scheme and how it works. Within this, you will also need to set eligibility criteria if there’s any you want to apply outside of the scheme criteria.

Another element to consider is how your employees can apply for the loan scheme. Most employers provide an application form for staff to submit.

Approving The Scheme

When an employee submits their application, you will need to check whether their earnings can accommodate the benefit.

What type of ticket they require is to be considered by you, the employer. Some companies don’t provide loans for monthly, weekly or daily tickets. What you offer is down to you.

Effective Communication

As the employer, if you’re going to cover the cost of a season ticket, you need to ensure your employees know about it. An effective communication strategy helps to increase company awareness of the scheme. It also boosts employee engagement.

Your workforce needs to know:

• What the season ticket can be used for (e.g. rail travel between two specific stations)
• Who is eligible for the scheme? What criteria do staff need to meet?
• How to apply for a season ticket loan
• The repayment period and how to pay the loan back
• If the loan affects their pay?

For your employees to get value from a season ticket scheme, they need to understand how it works and how to use it.

Measuring Success

An important part of offering employee benefits is checking whether it’s being well received by your employees.

Employers should keep records of the number of employees who have applied for the season ticket loan. If you find only a small number are interested, consider why this may be. It may be a communications issue. How much information did you provide? Do your staff understand how the season ticket loan scheme works and how to apply?

Feedback is a useful tool for employers here. Finding out what staff like and dislike, or any queries they may have, can be helpful in increasing engagement with your employee benefits.

The My.Drewberry platform lets employees apply for benefits directly within it, making it easier for you to track uptake. Managing the scheme can also be done through the platform.

Find out more about My.Drewberry by calling 02074425880 or email help@drewberry.co.uk.

Nick Nelms
Senior Consultant, Employee Benefits

Get Expert Advice On Your Employee Benefits

Season ticket loan schemes are one of many employee benefits you can offer to your workforce. At Drewberry™, we know setting up benefits can be time consuming for employers, which is where our employee benefits team can help.

If you need our help to set up a season ticket loan scheme or implement other travel benefits, such as cycle to work or an electric vehicle scheme, we’re here to help.

We’ve helped UK businesses of all shapes and sizes to set up their employee benefits package. If you need advice or help with implementing these, get in touch. You can call us on 02074425880 or email help@drewberry.co.uk.

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