Going to art galleries, playing netball, listening to podcasts and spending time with friends and family. Juliet is originally from London and graduated from the University of Cambridge with first class honours. During her time at university she volunteered as Canteen Treasurer for a student-run café and spent a year in Germany teaching English for business to German students and German and English to refugees. David is originally from London and graduated from the University of Manchester with first class honours. Earlier in his career, David worked in the audit, accounts and tax departments of a central London firm where he also qualified as a chartered accountant. Playing (and watching) football, spending time with friends, and playing the ukulele.
Cost of living crisis: what can businesses do…
- That requirement does not apply if an employer makes only occasional loans to employees using regulated agreements.
- Sarah Laing looks at how employers can help employees by offering a tax-free cheap or interest-free loan.
- As mentioned, employers have lots of control over the scheme including the ability to set maximum spend limits.
- David is originally from London and graduated from the University of Manchester with first class honours.
For instance, pension contributions through salary sacrifice reduce both income tax and National Insurance liabilities. There are loads of reasons why the season ticket loan scheme is so popular with employers and employees. It cannot, therefore, apply where a loan is made by a company, even where that company is controlled by somebody with the relevant personal relationship. However, certain loans can be chargeable under the employment-related loan rules where they are made by an individual having a material interest in a close company. In these cases, where the loan is made by the individual with the material interest, the exemption for loans made in the course of personal relationships can still be available. One potential drawback is the impact on statutory benefits, such as maternity pay or redundancy payments, which are often based on pre-sacrifice salary levels.
Simon joined FKGB as a Junior Trainee Accountant in 2025, after completing his studies in Economics and Management in Milan and pursuing a Master’s in Financial Economics at Reichman University in Israel. Before joining FKGB, he managed bookkeeping and logistics for a family-run jewelry business and interned at BNL – Group BNP Paribas, where he rotated through key departments including Investment Banking and M&A. Simon is highly motivated to develop his expertise in accounting and financial analysis while contributing meaningful value to clients. Employers have the flexibility to determine the repayment period, ensuring the scheme works effectively for both the employer and the employee.
Re: Annual rail season ticket
To pay for this out of her take-home pay she would need to receive gross pay of £9,500 (i.e. £9,500 less tax at 40% (£3,800) and Class 1 NICs at 2% (£190)). The tax charge generally arises on the difference between interest at the appropriate ‘official rate’ (currently 2.25%) and the interest (if any) actually paid. If the loans are made by a public company, then this financial assistance is unlawful unless it falls within certain limited exceptions. If the loan is made by a private company, this will generally be permitted, unless it is for the purpose of acquiring shares in its parent company where that parent company is a public company.
A caveat to this however, is that the savings you can deliver to your employees through the following initiatives are only savings if your employees want the benefit. Therefore, we advise you get the opinion of your employees before implementing any of these suggestions. Sarah Laing looks at how employers can help employees by offering a tax-free cheap or interest-free loan.
Loans to directors are generally prohibited under the Companies Act 2006, although loans not exceeding £10,000 are permitted and larger loans may now be made with the approval of the members. Loans to directors require shareholder approval in advance under the Companies Act 2006. If that consent is not obtained, then the loans are voidable, although may be affirmed by shareholders after the event. She graduated from the University of Birmingham with a first class honors in Economics. David joined to FKGB in 2019 having spent 6 years in the financial department for a real estate developing company in Cali, Colombia. Having qualified in London in 2019 he decided to move to Israel in pursuit of a new life and joined the FKGB team as a senior accountant having spent time in mid tier firms in London.
What to report and pay
Provided the total of all beneficial loans made to Brenda by her employer is less than £10,000, no taxable benefit arises, so the cost of the benefit is nil. These are just a few suggestions of the benefits you can deliver to your employees to reduce the tax both you and they are liable for. Employers may provide employees with assistance towards meeting the costs of public transport which the employee uses for commuting to and from their permanent place of work.
Employees would normally buy shares at the market value on options that are first offered (grant). Employees can then profit from any growth in the company when they sell their shares after a period of time, determine by you. If the public transport costs aren’t exempt, you may have to report them to HM Revenue and Customs (HMRC), and deduct and pay tax and National Insurance. Changes in recent years have seen the scheme become even more popular and it’s become a key part of many business’ employee benefits offering.
Understanding Season Ticket Loans and Salary Sacrifice Benefits
One way to reward your employees and improve the efficiency of your business is to award your employees for suggestions that benefit your business. Suggestion Schemes have been around for years, the key is to encourage your employees to use them. Employees ‘sacrifice’ a proportion of pay for these benefits, lowering their overall salary and therefore the tax and National Insurance they are liable for. Along with broadening the net of potential new recruits, the scheme helps support employee retention through better supporting employees with their commute. Employers can also decide the repayment period to ensure the scheme works in the best way possible for the employer and the employee.
If a loan is made by a close company to a participator, then a corporation tax charge equal to 25% of the loan will arise, unless certain limited exceptions apply. There are work season ticket loans taxable is a possibility that a tax charge will arise if the loan is made to a participator (broadly speaking, a shareholder of the company) by a close company. A close company is controlled by five or fewer participators or by its directors. That requirement does not apply if an employer makes only occasional loans to employees using regulated agreements. However, if you plan to offer these types of loans to a large number of employees, perhaps as part of an employee share plan, then it may be a prudent step to obtain this licence.
These season ticket loans are completely ‘tax free’ meaning they do not affect the taxable income of your employees one way or another. The benefit is just that employees can spread the cost of an annual ticket across the year instead of paying for more expensive, monthly tickets. Employers incorporating season ticket loans and salary sacrifice schemes into their compensation strategies must ensure compliance with legal and regulatory frameworks. All agreements should be thoroughly documented, clearly outlining employee and employer rights and obligations.
Gary splits his time between Israel and the UK helping clients with accounting and taxation, as well as business development and planning. Having a hands-on approach, he enjoys the challenges that a diverse client-base brings. Gary works with a wide range of clients providing advice on variety of matters, but he has a close affinity to the technology and property sectors. Having specialist knowledge in both of these areas enables him to provide a valuable service which not only meets but exceeds client expectations.
As mentioned, employers have lots of control over the scheme including the ability to set maximum spend limits. There’s hybrid, part-time or full-time remote and the way people work can vary hugely across different roles, industries and businesses. However, issues may arise if a company lends money to enable employees to acquire shares in that company or a group company.
Exemptions
If the loan is not exempt, the loan agreement will be a “regulated agreement” for the purposes of the CCA. After choosing the appropriate benefits, employers should draft a legally compliant salary sacrifice agreement. This document must outline the terms of the arrangement, including the salary reduction amount, duration, and conditions for amendment or termination. Employers must also ensure that the revised salary does not fall below the National Minimum Wage to avoid compliance issues.
Flexi-season tickets have been introduced in response to the hybrid working model. These tickets help hybrid workers manage travel costs when commuting on an occasional basis. Here we discuss the benefits that can save your employees tax, and do not require you spending too much money.
- This document must outline the terms of the arrangement, including the salary reduction amount, duration, and conditions for amendment or termination.
- The loan is repaid monthly through deductions from the employee’s net pay over a set period.
- Gary works with a wide range of clients providing advice on variety of matters, but he has a close affinity to the technology and property sectors.
- However, certain loans can be chargeable under the employment-related loan rules where they are made by an individual having a material interest in a close company.
- Along with broadening the net of potential new recruits, the scheme helps support employee retention through better supporting employees with their commute.
Personalized advice can help employees make informed decisions based on their circumstances. If the loan amount exceeds the £10,000 limit, the excess is taxed as a benefit-in-kind. The taxable benefit is calculated based on the official rate of interest, which HMRC sets annually.
Salary sacrifice schemes are one of the most popular and simple ways you can support your employees. These schemes involve your employees exchanging a proportion of pay to receive a non-cash benefit instead. If the public transport costs you pay are less than the amount of salary given up, report the salary amount instead. Our employee benefits resources offer advice and guidance from industry experts on a range of topics, drawing on our years of experience and expertise in employee benefits.
