The Department for Work and Pensions (DWP) has confirmed a major change to the Motability Scheme that takes effect today, July 1. The change, first announced at the Autumn Budget, involves the application of Value Added Tax (VAT) on advance payments for vehicles leased through the scheme.
What the change means for Motability users
The Motability Scheme enables disabled people to exchange their mobility allowances to lease an accessible vehicle. An advance payment is an extra fee required when choosing a more expensive vehicle. From today, VAT will be charged on these advance payments. Additionally, Insurance Premium Tax (IPT) will now apply to all new leases.
The DWP states that these changes are expected to save taxpayers £1 billion by 2030, while maintaining disabled people's access to cars, scooters, and powered wheelchairs. The reforms are part of a wider package of welfare changes projected to save nearly £2 billion by the end of the decade.
Luxury vehicles removed earlier
At the last budget, luxury vehicles such as BMW and Mercedes were removed from the scheme. Today's changes follow that decision and are intended to ensure the scheme remains sustainable.
Disabled people on enhanced mobility benefits will continue to receive their full weekly award of £77.05 and remain eligible for the scheme. Vehicles that require no advance payment are still available, meaning individuals can access a car using their benefit alone.
Government's fairness argument
Work and Pensions Secretary Pat McFadden MP said: "Today's changes are driven by the fairness that underpins this Government - fairness for the taxpayer, fairness for disabled people, and fairness for the country. We're saving £1 billion of taxpayer money by removing VAT relief from some new Motability leases, whilst ensuring the scheme still supports disabled people's mobility and independence. We’re building a fair welfare system and an economy that works for everyone."
Broader welfare reforms
The DWP says these reforms are part of a wider drive to fix the welfare system, including introducing a Right to Try Work Guarantee, investing £3.5 billion in tailored employment support for sick or disabled people, increasing face-to-face assessments for health benefits, tackling fraud and error to save £14.6 billion over this parliament, and rebalancing Universal Credit to address perverse incentives that discourage work.
