Changes to tax exemptions for the Motability Scheme are set to come into force on July 1, 2026. The scheme supports hundreds of thousands of disabled people across Great Britain by enabling them to lease a car, wheelchair accessible vehicle, scooter or powered wheelchair using their mobility allowance.
From that date, the VAT zero-rate on top-up payments for higher-value vehicles will be removed, meaning these payments will be subject to the standard 20% VAT rate. However, vehicles designed or adapted for wheelchair or stretcher users will remain zero-rated. Additionally, the Insurance Premium Tax (IPT) exemption will be restricted, with standard rate IPT of 12% applying to most vehicles leased through the scheme, except those for wheelchair or stretcher users.
Current leases will not be affected by the changes. The Motability Scheme stated it will continue to provide the best possible leasing package, and the Motability Foundation will continue to offer means-tested grants for specialist adaptations.
To be eligible for the scheme, individuals must receive a qualifying mobility allowance with at least 12 months remaining. Qualifying benefits include Personal Independence Payment (PIP), Adult Disability Payment (ADP), and others from the DWP, Ministry of Defence, Social Security Scotland, or Department for Communities (Northern Ireland).
