Tax exemption for travel season ticket loans doubles

Budget 2013: The threshold for tax exemption on employment-related ‘taxable cheap’, low-cost or interest-free loans, such as travel season ticket loans, will double.

Chancellor George Osbourne revealed in his 2013 Budget speech that the current threshold of £5,000 will increase to £10,000 for the 2014-15 tax year. As long as the total outstanding balances on these loans do not exceed the threshold at any time in a tax year, there will be no tax charge.

Legislation will be introduced in the Finance Bill 2014, before the change comes into effect from 6 April 2014.

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Following the change, employers will no longer be required to report details of small loans where the outstanding balance is £10,000 or less throughout a tax year.

The government expects 7,000 employers will benefit from the measure and that the financial result from the reduction in administrative duties will total £600,000 per year.

Mark Groom, tax partner at Deloitte, said: “This simple change will make a big difference to many employees. For example, many employers provide employees with low or interest-free loans to enable them to buy transport season tickets. 

“With the cost of commuting increasing, the loans required are starting to exceed the existing tax-free limit. Doubling this to £10,000 will help employees get to work without the additional burden of a taxable benefit in kind arising.”

Shawn Healy, employment tax director at BDO, added: “The exemption threshold increase is a welcome change.

“A lot of people traveling into [London] every year pay a lot more than £5,000 for a train season ticket.

“I don’t think it will have a dramatic effect,  but it will be helpful because it cuts the P11D reporting requirements, that currently exist for loans over £5,000, and will produce a small tax saving for employees.”