Season ticket loans

A season ticket loan is an interest-free loan from your employer to buy an annual travel ticket. You repay it in equal instalments from your take-home pay, usually over the year the ticket covers. Annual rail, bus and tram tickets usually cost less than paying monthly or weekly, and the loan gets you that lower price without finding the money upfront. Civil Service departments, many councils, NHS trusts and some academy trusts run these schemes, though they are rarer in smaller schools and GP practices.

How the loan works

You get a quote for an annual ticket and apply to your employer through the HR system or a form. Once approved, the employer either pays you the money (which you then use to buy the ticket and send in a receipt) or pays the travel operator directly and hands you the ticket.

Repayments are fixed deductions from your net pay, after Income Tax and National Insurance, so the loan does not reduce your tax or NI. The whole saving is the difference between the annual ticket price and what you would otherwise have paid.

Say a hypothetical annual ticket costs £3,000. The employer lends you £3,000, and you repay £250 a month for 12 months. If monthly tickets for the same journey would have cost more over the year, the gap is your saving, and the loan costs you no interest.

Who can apply

Each employer sets its own conditions. Common ones are:

• You must be an employee on a permanent contract, or on a fixed-term contract that lasts at least as long as the repayment period
• You may need to have passed probation
• The ticket must be for travel between home and your usual workplace
• Only one loan at a time

Part-time staff can usually apply on the same basis as full-timers, as long as their net pay is large enough to cover the repayments. Bank, agency and casual workers are normally excluded.

Some employers use the same scheme, or a similar one, for bicycles, rental deposits or annual parking permits. Bikes are more often bought through the cycle to work scheme, which has a tax advantage the loan lacks.

Tax rules on employer loans

For tax purposes, an employer loan at no interest or low interest is a “beneficial loan”. HMRC sets a threshold for the total value of all cheap or interest-free loans your employer gives you. If the combined balance stays under that threshold throughout the tax year, there is no tax to pay and nothing to report. Above it, the employer must report the loan, and you pay tax on the interest you have saved, worked out at HMRC’s official rate.

A single season ticket loan is usually well under the threshold. Check if you also have other loans from your employer, such as an advance of salary or a relocation loan. HMRC’s guidance on loans to employees sets out the current threshold and official rate.

If you leave or your circumstances change

The loan agreement will say that if you leave before it is repaid, the balance is taken from your final pay. That deduction is lawful because you agreed to it in writing in advance. If your final pay does not cover it, you will be asked to repay the rest directly. The deductions from wages guide covers the legal rules.

If you stop needing the ticket, because you move house or change workplace for example, most operators let you surrender an annual ticket for a partial refund, minus a fee. You then pay the refund back to your employer, and any remaining balance on the loan stays due.

Maternity leave, long sickness or a drop to half pay can make the repayments hard to cover. Employers usually agree to pause or reduce them if asked early, so talk to payroll before the reduced pay starts.

Checking your payslip

The repayment shows as a separate deduction, often labelled “STL” or “season ticket loan”, and it should stop automatically after the final instalment. If it carries on, or the amounts look wrong, raise it with payroll straight away. Your payslip explained shows where to find each deduction.

Where to find the scheme

Search your intranet or staff handbook for “season ticket loan” or “travel loan”. In the Civil Service it usually sits with other perks on the departmental benefits page, and Civil Service benefits lists the wider package. In the NHS and councils it may be listed under staff benefits, travel or sustainability. If your employer does not have one, ask HR whether it has been considered. The administrative cost to the employer is low, and some have introduced the scheme after staff asked.