Glossary of terms2019-10-11T14:32:58+00:00

Glossary of terms

Increasing numbers of organisations throughout the country now offer their employees the benefit of a brand new car in return for surrendering a set amount from their salary every month.

There are some phrases and jargon which surround car schemes which potential users might not understand. With that in mind we’ve taken at look at some of the most commonly used terms and explain what they mean for employees in the context of employee benefit car schemes.

Glossary of terms

| A | B | C | D | E | F | G | H | I | L | M | N | O | P | S | T | U | W

A (index)

Annual mileage

Cars are financed for a set period of time, typically two or three years. During this time there is an agreed annual mileage allowance, often ranging from 10-20,000 miles per annum. At the end of the contract any mileage travelled in excess of the pre-agreed limit is usually charged for (see E – excess mileage).

B (index)

Benefit-in-Kind tax

This applies to car salary sacrifice agreements. Although there is no Income Tax or National Insurance Contributions charged on the amount of salary sacrificed in a salary sacrifice car scheme, you would be liable for Benefit-in-Kind tax (also known as Company car tax – see C) on the value of the car benefit at your marginal rate of tax (20%, 40% or 45%).


The BVRLA is the trade body for rental and leasing companies in the UK. With approximately 700 members and a strict code of conduct, they have supported the British car industry by driving up supplier standards to meet consumer expectations. A salary sacrifice supplier is likely to be a member, and if so you can rest assured you’re in good hands.

C (index)

Carbon dioxide emissions (CO2)

Vehicles produce carbon dioxide emissions (CO2) which are measured in grams per km (g/km). Lower emitting vehicles are not only better for the environment but also attract lower tax rates. It’s for both the environmental and financial reasons that the lowest emitting vehicles tend to be the most popular with drivers within salary sacrifice car schemes. When quoting on a salary sacrifice vehicle you should be provided with the manufacturer’s emissions figure of your chosen car.

Contract term

Lifestyle Lease cars are provided to you for a pre-determined length of time known as the contract term. Most frequently the term will be two or three years. At the end of this contract period the car is normally returned to the finance company, although it may be possible for you to buy the car.


Unlike many benefits which have a short selection window, car schemes are usually available throughout the year. Staying up to date with the scheme and being aware of the latest offers reduces the chance of you missing out. Communications from your scheme provider might include information about a benefits portal which allows you to quote, updates on your intranet, email bulletins, roadshows, forums, posters, payroll communications and open days.

Company car tax

Company car tax (also known as Benefit-in-Kind tax – see B) is based on a calculation that includes a number of variables, including the amount of CO2 its engine emits, the type of fuel used and the taxable list price of the car. The higher the official CO2 figure of the car, the more tax is due – hence why salary sacrifice car schemes work best with low carbon emitting cars.

D (index)


Duty of care

The Lifestyle Lease scheme provides employees with the opportunity to drive well maintained, modern vehicles with low emissions and high fuel efficiency. Employers like to offer this to their staff as it helps improve driver safety and therefore meet their duty of care responsibilities to staff who drive on business.

E (index)

Early Termination

As with mobile phones, TV packages and gym contracts, early termination (ending your contract before the term is completed) of a car scheme contract is likely to result in charges to you. It’s important that you read the Terms & Conditions of your contract closely before ordering a vehicle and are aware of what this cost might be.

Excess mileage charges

A quote for your chosen vehicle will be based upon an annual mileage (see A). If you go over the total contracted mileage you may be required to pay an excess mileage charge when you return your vehicle. The amount to be paid is based on a pence per mile (ppm) figure which you will see on your quotation.

F (index)

Fair Wear & Tear

When you lease a vehicle (see L – Leasing) you normally return it to the provider at the end of the contract term. To protect both parties there needs to be a common understanding of what is considered to be fair wear & tear for a vehicle of a certain age that has travelled a certain amount of miles. Most schemes are governed by guidelines produced by the industry trade body BVRLA (see B – BVRLA). Before returning your vehicle at the end of a contract you should review your scheme’s Fair Wear & Tear guidelines.


G (index)

Gross pay

Gross pay is the salary you receive before the deduction of tax and other outgoings. If using a salary sacrifice structure for a car, as with other benefits such as childcare vouchers or cycle-to-work schemes, is always taken from gross and not net pay.

H (index)

HMRC approval

HM Revenue & Customs (HMRC) has taken an active interest in the growth of salary sacrifice car schemes because of the amount of Income Tax and National Insurance they save for employees. A reputable provider of salary sacrifice car schemes will have sought and received approval for the scheme from HMRC.

HR department

As a car scheme is another form of employee benefit, it is normally established by the company HR department in conjunction with a chosen supplier.

I (index)


L (index)

Low carbon-emitting cars

Through a variety of taxation methods the UK government incentivises motorists to opt for vehicles with lower CO2 emissions. This in turn means manufacturers are building increasingly environmentally vehicles. At present a vehicle might be considered low carbon emitting with a CO2 rating of up to 119g/km but this number continues to fall.

M (index)

Minimum wage

Salary sacrifice car schemes are not typically available to employees if the deduction from their gross pay takes them below the National Minimum Wage or National Living Wage threshold.

N (index)

National Insurance Contributions

Salary sacrifice car schemes create savings for you in the amount of National Insurance which you pay. However, it is worth being aware that your ultimate state pension entitlement may be restricted due to the reduced National Insurance Contributions.

Net pay

Net pay is your pay received after deductions of Income Tax, National Insurance and other statutory outgoings. If you take a salary sacrifice car scheme, your contributions are always taken from gross pay and never paid for out of net pay, meaning your money goes further.

O (index)

Online platform

Online platform is a frequently used term for lots of computer software systems. With an employee car scheme this is where you’ll be able to search for a car that meets your requirements and build your own instant quotations. The platform will usually give a monthly rental figure that will be deducted from salary but it should also highlight the savings that can be made for each model and explain how the scheme works.

P (index)


The P11D value of the vehicle is important as it’s the value upon which HMRC calculates the amount of Benefit-in-Kind tax that you will pay. The P11D value includes the list price of the car including VAT and accessories, delivery fees, vehicle excise duty and the first registration fee.

Q (index)


Your quotation should be tailored to match your individual needs around areas such as annual mileage and contract length. In addition to this it’s important to note areas on the quote such as any deposit to be paid (usually zero) and the excess mileage charges.

S (index)


Your car scheme supplier (often a vehicle leasing company) should be there to support you throughout the journey from beginning your first quote to vehicle delivery and happy driving. Many schemes provide a single point of contact to work with you throughout this whole process.


Employee car schemes can create major savings through negotiated discounts and, in the case of salary sacrifice arrangements, potentially via tax and national insurance contributions (NIC) on the earnings that are sacrificed. Potential for tax savings will depend on the vehicle choice and your marginal tax rate.

U (index)

Unforeseen running costs

As a Lifestyle Lease car driver you will be sheltered from many ongoing costs, both predictable and unforeseen. The reason is that all running costs are covered under the agreement. Maxxia is also on hand to arrange for servicing and repairs and to deal with any issues that arise from accident management to end of contract renewal.

W (index)

Wider choice

Employee benefit cars schemes not only provide a wide choice of vehicles for you to select from, but in doing so they are providing access to corporate buying terms across a broad selection of makes and models. Often these terms will be better than can be secured by an individual.