The Motability scheme has been a vital resource for people with disabilities. However significant changes are taking effect this year. These include new VAT charges on advance payments & Insurance Premium Tax along with the removal of certain luxury vehicles from the program. Understanding the Motability Scheme The Motability scheme allows people who receive the higher or enhanced rate of the mobility component of disability benefits to exchange some or all of their payments for a lease on a new car or accessible vehicle.
The program currently supports more than 815000 people who receive either Personal Independence Payments or Disability Living Allowance. According to BirminghamLive the Department for Work and Pension will protect certain groups of people on PIP and DLA from these changes. The new rules will only apply to new claimants. Upcoming Tax Changes The Labour Government announced last year that tax changes would affect the Motability scheme.
This summer the program will introduce new charges related to taxes and mileage and tires for claimants as part of efforts to reduce welfare costs. What the New Rules Mean Under the new rules a 20% VAT will apply to the upfront cost of vehicles & a 12% Insurance Premium Tax will apply to the insurance portion of the lease.
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However several groups will be protected from these changes. Current leases will remain unchanged until they expire. Anyone who places an order before July 1 2026 will secure current prices and terms even if delivery occurs after that date. Users of Wheelchair Accessible Vehicles will continue to be exempt from the new VAT and IPT charges.
Regional Impact These changes currently apply only to the UK-wide scheme. The Scottish Government is still reviewing how these modifications will affect its Accessible Vehicles and Equipment program in Scotland. Tracker Requirements Starting in April 2026 all new customers regardless of age must have a Drive Smart tracker installed. Previously this requirement applied mainly to drivers under 25. Following last year’s budget the scheme faces £300 million in new tax obligations.
