Expenses and benefits: public transport

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1. Overview

As an employer covering your employees’ public transport costs, you have certain tax, National Insurance and reporting obligations.

What’s 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’t have to report anything to HM Revenue and Customs (HMRC) if you’re contributing to subsidised or free public bus transport. You don’t 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’ 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’t 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:

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’ll need to:

  • add the cost to your employee’s 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’t apply to arrangements made before 6 April 2017 - check when the rules will change.

4. Technical guidance

The following guides contain more detailed information: