Season ticket loans: the £10,000 rule, the official rate, and what an employer reports

An interest-free season ticket loan is one of the few ways an employer can help with commuting costs without creating a tax charge, and it works because of one threshold in the Income Tax (Earnings and Pensions) Act 2003: up to £10,000 outstanding at all times in the tax year, there is nothing to tax and nothing to report. Above it the whole loan is in charge, at HMRC’s official rate. This page sets out the statute, HMRC’s manual and the employer guidance, as read on 19 October 2026, with the arithmetic done.

Three ways an employer can help, and how each is taxed

GOV.UK groups these together. “Public transport costs include: season tickets provided for employees season ticket costs reimbursed to employees loans made to employees to buy season tickets” Only one of them can be tax-free for the employee.

The reason the first two are taxable is that a season ticket is ordinary commuting, which sits outside the business travel rules explained on business travel expenses and tax. A loan works differently: the employee pays for the ticket in full, out of taxed pay, and the only benefit is not being charged interest.

The £10,000 threshold, in the Act’s words

HMRC’s manual says the same thing more plainly: “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.” Three details follow from the wording.

• “At all times in the year”. The test is the highest balance, not the average. For a loan repaid in instalments HMRC accepts a shortcut, because “the maximum balance in any year cannot exceed the balance at the beginning of that year” (or, for a new loan, the amount when it was made).
• All loans together. The threshold applies to the aggregate of the employee’s taxable cheap loans, so a season ticket loan and another interest-free staff loan are added up.
• Exactly £10,000 is inside it. The Act says “does not exceed”. GOV.UK’s summary page says the exemption covers loans “with a combined outstanding value to an employee of less than £10,000 throughout the whole tax year”. A loan of precisely £10,000 is exempt under the Act; the shorter page is a paraphrase.

The benefit does not depend on the employee feeling better off. “It is not necessary for the loan to be advantageous to the recipient for a chargeable benefit to arise.”

Above £10,000: how the benefit is worked out

If the threshold is exceeded, s.175 applies to the loan and “The cash equivalent of the benefit of the loan is to be treated as earnings from the employee's employment for the tax year.” The cash equivalent is the interest the loan would have carried at the official rate, less any interest actually paid. The normal method in s.182 averages two balances — at the start of the tax year (or when the loan was made) and at the end (or when it was repaid): “Add these amounts together and divide the result by 2.” That average is multiplied by the official rate and by the number of whole months outstanding over 12, and “For this purpose a month begins on the sixth day of the calendar month.”

HMRC’s official rate table shows 3.75% from 6 April 2026, unchanged from 2025 to 2026.

The cash equivalent is added to the employee’s taxable earnings and taxed at their own rate; the employer reports it on the P11D. For beneficial loans GOV.UK says the employer must “report it on form P11D pay Class 1A National Insurance on the value of the benefit”. The Class 1A figure above is 15% of the cash equivalent, the rate HMRC publishes for 2026 to 2027.

Keeping a larger loan out of charge

Two routes in GOV.UK’s exemptions list apply to a loan above £10,000. The employee can pay interest at the official rate, which leaves nothing to tax; or the loan can be made “to an employee for a fixed and invariable period, and at a fixed and invariable rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out”. The second fixes the comparison at the rate in force when the loan is taken out, so a later rise in the official rate does not bring it into charge.

When the loan is not repaid

When an employee leaves with a balance outstanding and the employer decides not to recover it, the written-off amount has to be reported whatever the size of the loan. HMRC’s manual: “The release or writing off of any loan to an employee may be chargeable to tax”. GOV.UK: “You always have to report and pay on loans to employees that you write off, whether or not they are classed as beneficial loans.” The employer must report it on the P11D and “deduct and pay Class 1 National Insurance (but not PAYE tax) on the value of the benefit”. A loan policy that says what happens to the balance on leaving avoids an unplanned write-off.

Salary sacrifice versions

Some schemes are run through salary sacrifice rather than as a straightforward loan. That changes the reporting: “You do have to report loans to your employees or their relatives if they’re made as part of a salary sacrifice arrangement.” For season tickets GOV.UK adds that “If the public transport costs you pay are less than the amount of salary given up, report the salary amount instead.” Salary sacrifice rules more generally, including the arrangements that keep their tax advantage, are on salary sacrifice car schemes.

Buying the ticket for the employee: what has changed

An employer that wants to buy season tickets on account rather than lend the money needs a rail account. The rail warrant route is no longer open to new users: “Season ticket rail warrant usage is now restricted to a limited number of organisations that are already account holders. New account applications are no longer accepted.” ATOC points organisations to train company Business Travel Service accounts, travel management companies and online retailers instead, which are compared on corporate travel accounts. A ticket bought that way is still the employer providing a season ticket, taxed on the full cost as in the first row of the table above.

An employer’s checklist

• Cap the scheme at £10,000, or decide in advance how loans above it will carry interest.
• Count other interest-free staff loans towards the same £10,000.
• Check the highest balance in the tax year, which for a new loan is the amount lent.
• Say in the policy what happens to the balance on leaving; a write-off is taxable.
• If salary sacrifice is involved, report the higher of the salary given up and the benefit.
• Recheck the official rate each April: 3.75% for 2026 to 2027.

This page quotes GOV.UK, the Income Tax (Earnings and Pensions) Act 2003 and HMRC’s Employment Income Manual as read on 19 October 2026. The official rate and the worked figures are checked against HMRC’s rates table every time this site is built. Reporting the benefit is covered on P11D and business travel. Help with cycling to work uses a different exemption, with no loan involved: the Cycle to Work scheme.

Common questions