Expenses and benefits: public transport
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1. Overview
As an employer covering your employees鈥� public transport costs, you have certain tax, National Insurance and reporting obligations.
What鈥檚 included
Public transport costs include:
- season tickets provided for employees
- season ticket costs reimbursed to employees
- loans made to employees to buy season tickets
- contributions to subsidised or free public bus transport
2. What's exempt
You don鈥檛 have to report anything to HM Revenue and Customs (HMRC) if you鈥檙e contributing to subsidised or free public bus transport. You don鈥檛 have to pay any tax or National Insurance on these costs.
An example would be when you help finance a bus route that gives your employees free or reduced-rate transport between their homes and work or between workplaces.
Salary sacrifice arrangements
You do have to report your employees鈥� public transport costs if they are a part of a salary sacrifice arrangement.
3. What to report and pay
If the public transport costs aren鈥檛 exempt, you may have to report them to HM Revenue and Customs (HMRC), and deduct and pay tax and National Insurance.
Season tickets provided for employees
This also includes any other public transport vouchers you provide to employees.
You must:
- report the cost on form P11D
- add the full cost to their earnings and deduct Class 1 National Insurance (but not PAYE tax) through payroll
Season ticket costs reimbursed to employees
This covers arrangements where your employee buys their own season ticket but you reimburse them or cover their costs with an allowance or salary increase. This counts as earnings, so you鈥檒l need to:
- add the cost to your employee鈥檚 other earnings
- deduct and pay PAYE tax and Class 1 National Insurance through payroll
Loans made to employees to buy season tickets
You should treat this as you would any other loan made to an employee.
Salary sacrifice arrangements
If the public transport costs you pay are less than the amount of salary given up, report the salary amount instead.
These rules don鈥檛 apply to arrangements made before 6 April 2017 - check when the rules will change.
4. Technical guidance
The following guides contain more detailed information: