The Department for Work and Pensions (DWP) has introduced new VAT and insurance tax charges for Motability Scheme customers in England and Wales as of July 1, with the aim of saving £1 billion by 2030. The changes do not apply to Scotland, where the scheme operates under a separate agreement with the Scottish Government, known as the Accessible Vehicles and Equipment Scheme (AVES). Discussions with the Scottish Government are ongoing regarding potential future changes.
Background and Rationale
The Motability Scheme allows disabled individuals to lease a car, wheelchair-accessible vehicle, scooter, or powered wheelchair using part of their Personal Independence Payment (PIP) mobility component. The scheme came under scrutiny last year after reports that luxury vehicles such as BMWs and Mercedes were available through it. Chancellor Rachel Reeves removed these vehicles from the scheme in the Autumn Budget, and further measures announced in November are now being implemented.
Work and Pensions Secretary Pat McFadden stated: “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.”
Specific Changes for New Orders
From July 1, new orders in England and Wales will be subject to the following changes:
- A mileage allowance of 30,000 miles for a three-year lease.
- A mileage allowance of 50,000 miles for a five-year Wheelchair Accessible Vehicle (WAV) lease.
- An excess mileage charge of 25p per mile, including VAT.
- Up to six tyre replacements during a three-year lease, including up to four for accidental damage.
- Up to 10 tyre replacements during a five-year WAV lease, including up to six for accidental damage.
- A £22 administration fee for a VE103 certificate required when travelling outside the UK with a Motability vehicle.
Existing leases remain unaffected. A full guide is available on the Motability Scheme website.
Impact on Customers
Andrew Miller, chief executive of Motability Operations, the company that runs the scheme, commented: “Tax changes announced in the UK Government’s Autumn Budget have significantly increased the cost of running the Motability scheme. While we have had to make difficult decisions in response, the changes we are making mean the scheme can keep disabled people connected to freedom and independence now and in the future.”
As of the latest figures, there are 815,000 Motability customers across the UK, including around 80,000 in Scotland who use the Accessible Vehicles and Equipment Scheme. PIP currently provides between £121.20 and £778.40 every four weeks to over 4 million claimants.
Scottish Customers Retain Benefits
For Scottish customers, the existing terms remain unchanged for new orders:
- Three-year lease: 60,000-mile allowance, up to eight tyre replacements, 5p excess mileage fee plus VAT, no VE103 fee.
- Five-year WAV lease: 100,000-mile allowance, up to 10 tyre replacements, 5p excess mileage fee plus VAT, no VE103 fee.
The Trustees of the Motability Foundation have approved a one-off discretionary grant to cover additional costs of maintaining the current lease package while discussions with the Scottish Government continue. Further updates will be provided once future arrangements for customers receiving allowances from Social Security Scotland are agreed.
