9 January 2012
January saw substantial increases in train fares for daily commuters to the capital, in many cases in excess of 5%. It is probably now the norm that an annual season ticket represents a significant investment.
Commuters usually have to pay rail fares from their net income as the travel costs are rarely tax deductible. Consequently for a 40% tax paying commuter they must earn nearly £170 before tax, to pay for a fare increase of £100.
In the current economic climate businesses are clearly unable to keep pace through salary rises, with such increases.
What can be done?
From a tax perspective an employee receiving a loan from his employer would usually be liable for a benefit in kind income tax charge. A national insurance charge can also arise to his employer.
However ‘small’ loans to officers and employees, where the total balance on all loans to that individual is £5,000 or less, are exempt from both the tax and national insurance charges. Therefore, many firms already offer interest free season ticket loans to their employees, which have become popular.
For those owning and managing businesses, a separate tax charge can arise where a participator in the business takes a loan from the company. Again, however, a loan of £5,000 or less may not be caught by this charge in certain circumstances.
Businesses are usually keen to incentivise their staff as far as possible even if they are not in a position to provide pay rises. Loans such as these may provide only a very small benefit and incentive. Nonetheless it is often little things such as these which have the greatest impact and engender loyalty.
If you would like to know more or would like to discuss whether this would be appropriate for your business please contact:
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