The government has confirmed significant changes to the Motability Scheme, which will come into effect from July 2026, impacting hundreds of thousands of disabled people across the UK. The alterations, announced in the Autumn Budget, will introduce new taxes on leases and remove certain premium vehicles, leading to an anticipated increase in costs for users.
What is Changing for Motability Users?
The Motability Scheme allows individuals to exchange their enhanced mobility award from qualifying disability benefits—such as Personal Independence Payment (PIP) or Adult Disability Payment (ADP)—for a leased car, powered wheelchair, or mobility scooter. Currently, over 815,000 people hold a lease, with many vehicles adapted for wheelchair access.
From July 2026, two key tax changes will be applied. Firstly, Value Added Tax (VAT) will be levied on Advance Payments—the upfront sum often required to secure a vehicle. Secondly, Insurance Premium Tax will apply to the scheme leases themselves. Officials state these measures are necessary to keep the scheme sustainable but acknowledge they will make it more expensive for disabled users.
Furthermore, the range of available vehicles will be adjusted. Premium brands like BMW and Mercedes will no longer be included under the scheme, shifting the focus towards a choice of more affordable models.
Financial Impact and Scheme Adaptations
Motability has published new guidance warning that the tax changes will increase the cost of leasing. The organisation anticipates that the average Advance Payment will rise by approximately £400 over the standard three-year lease package.
In response, the Motability Foundation and Scheme are reviewing the entire leasing package to minimise price hikes for customers taking out new leases. Potential adjustments under consideration include changes to:
- Annual mileage allowances.
- Overseas breakdown cover.
- Increased use of telematics for insurance purposes.
Current leases will not be affected by the upcoming changes, and the scheme has committed to continuing its support for wheelchair-accessible vehicles and adaptations. It also pledges to maintain a range of 40 to 50 vehicles available with no upfront payment required.
New Measures to Combat Misuse
Alongside the financial restructuring, the scheme is taking stronger action against misuse. A new Special Investigations Unit is being formed, bringing together around 80 dedicated staff to tackle fraud and improper use of scheme vehicles.
Motability Operations, which runs the scheme, also plans to enhance data-sharing arrangements with government and police agencies. This is intended to enable quicker and more effective action when misuse is identified.
Nigel Fletcher, Chief Executive of the Motability Foundation, commented: "We understand the challenges disabled people face... The changes to tax reliefs imposed on the Scheme mean it will need to evolve. We are working hard to minimise price increases."
Andrew Miller, Chief Executive of Motability Operations, added that an evolved scheme would "continue to put the disabled people we serve at the heart of everything we do."
The Motability Foundation awarded £59.3 million in grants in the 2024-25 financial year to assist over 10,000 customers with the most serious needs. This grant support will continue.
Detailed guidance and answers for current users are available on the Motability Scheme website. Motability Operations will begin engaging directly with customers about the proposed changes in Spring 2026, ahead of the July implementation.
