Chancellor Rachel Reeves is reportedly considering imposing VAT on vehicles leased through the Motability scheme, which could add up to £3,000 to the cost of even the cheapest cars for disabled users. The move, speculated ahead of the upcoming Budget, has drawn sharp criticism from disability charities and the scheme's operators.
Motability Operations, which runs the scheme, warned that removing the VAT exemption would make cars unaffordable for most disabled people. A spokesperson said: 'Every pound of VAT relief is passed directly to disabled customers, many on low incomes, to make mobility affordable. Introducing VAT on leases would make cars unaffordable for most disabled people, leaving only the wealthiest able to access the Scheme.'
Analysis by Motability indicates that if VAT were applied, costs to disabled people could range from £3,000 to £6,500. The median household income of a scheme user is around £18,500, roughly half the UK average, meaning many would be priced out. The enhanced mobility component of Personal Independence Payments (PIP) is worth just over £4,000 a year.
The scheme was established to address a 'market failure' in transport for disabled people, offering three-year leases on cars, powered wheelchairs, or scooters in exchange for mobility allowances. A spokesperson added: 'Removing the zero-rating would erode this efficiency and undermine the social purpose of enabling independence and affordable mobility.'
Graham Footer, chief executive of Disabled Motoring UK, expressed concern: 'The fact this is even on the table for consideration is a worry. If the chancellor goes ahead with the changes, it will have a significant detrimental impact on Motability customers and for many it will put the scheme financially out of reach.'
