Rail Season Ticket Loan Over £5000

LONDON29

Hi All,

I am about to start a role which requires a rail season ticket loan of £5588 per annum. As I understand it any employer loan over £5k becomes taxable.

I am a 40% tax payer however assume i wouldnt pay 40% of £5588 as tax?

I would think the value of the benefit to be taken off of my tax code is the value of the loan's interest which I believe is 4% currently. I therefore assume the benefit value (which should be stated on my P11D) would be £223 (4% of £5588). In essence it would actually end up costing me £89 per year (40% of £223 benefit value)

Is this correct? if so, it is probably a better option than buying a season ticket via credit cards etc as the interest costs would be higher. Even if i used a 0% balance transfer to another card, there is normally a fee which would probably be more than £89.

If you could give me some guidance/confirmation i'd be really grateful.

Thanks in advance

AirlieBird

I'm no expert in this area so I'll leave to others to confirm.

I did have one thought though - Couldn't you get a season ticket loan for £5,000 and pay the remainder up front?

pjclar02

Hi there

It depends on how you repay the loan. Presumably the whole loan balance will not be outstanding for the whole of a tax year so the interest due at 4% will reduce on a sliding scale throughout the course of the year.

Below is a link to some of the calculations:

http://www.hmrc.gov.uk/manuals/eimanual/EIM26311.htm

Hope this helps

real1314

AirlieBird wrote: »

I'm no expert in this area so I'll leave to others to confirm.

I did have one thought though - Couldn't you get a season ticket loan for £5,000 and pay the remainder up front?

Which would make a lot of sense, given the small difference.

pjclar02 wrote: »

Hi there

It depends on how you repay the loan. Presumably the whole loan balance will not be outstanding for the whole of a tax year so the interest due at 4% will reduce on a sliding scale throughout the course of the year.

Below is a link to some of the calculations:

http://www.hmrc.gov.uk/manuals/eimanual/EIM26311.htm

Hope this helps

Which is also true - the average balance can be used, i.e about £2794, although as the loan was over £5k at any point in the tax year, the £5k limit has still been breached.

:cool: