Major adjustments to the Motability scheme are being implemented for new leases starting today to counterbalance tax implications. Motability, which enables individuals with disabilities to exchange their qualifying mobility allowance for leasing a new vehicle or mobility aid, will now face VAT and Insurance Premium tax on most new leases ordered after July 1, 2026. This change is estimated to result in an additional tax burden of £300 million for Motability, prompting modifications to mileage allowances.
Effective immediately, new contracts will include a yearly mileage limit of 10,000 miles, reduced from the previous 20,000 miles, with an increased charge of 25p per additional mile traveled, up from 5p per mile. The allowable number of tire replacements has also been trimmed to six over a three-year lease period, with ten replacements permitted for a five-year WAV lease, including up to six for damages.
Additional adjustments involve the introduction of an administrative fee, mandatory notification to the RAC when traveling to the EU, and the exclusion of luxury brand vehicles like BMWs and Mercedes from the scheme. To qualify for Motability, individuals must receive specific mobility-related allowances.
Motability Operations’ CEO, Andrew Miller, acknowledged the significant impact of tax changes on the scheme’s operations but emphasized the importance of maintaining accessibility and independence for disabled individuals. The government aims to save £1 billion by 2030 through these reforms, aligning with principles of fairness and fiscal responsibility.
Minister Pat McFadden highlighted the government’s commitment to fairness for taxpayers and disabled individuals while ensuring the sustainability of the scheme. The changes aim to strike a balance between cost efficiency and support for mobility and independence among disabled individuals, contributing to a more equitable welfare system and economy.
