Major adjustments are being made to the Motability scheme for new leases starting today due to the company’s need to counter tax implications. The Motability scheme enables individuals with disabilities to exchange their qualifying mobility allowance for leasing a new car, scooter, or powered wheelchair.
Following changes outlined in the autumn Budget last November, it was confirmed that VAT and Insurance Premium tax will now be applicable to most new leases ordered from July 1, 2026. Motability anticipates an additional tax burden of £300 million, prompting alterations to mileage allowances.
Effective immediately, new contracts will come with a mileage cap of 10,000 miles per year, reduced from 20,000 miles. Beyond this limit, an extra charge of 25p per mile driven will apply, up from the previous 5p rate.
In addition, the permissible number of tire replacements has been revised to six over a three-year lease, with a limit of ten replacements for a five-year WAV lease, out of which up to six can be for damage. An administrative fee must now be paid, and travelers to the EU are required to inform the RAC. Existing Motability leases will remain unaffected by these changes until their expiration.
Recent modifications to the Motability scheme include the compulsory installation of “Drive Smart” black boxes for vehicles used by drivers under 30 or new to the scheme, which was later rescinded in May 2026 due to customer dissatisfaction.
Luxury brand vehicles like BMWs and Mercedes have been excluded from the scheme by Chancellor Rachel Reeves. To qualify for Motability, individuals must receive the Higher Rate Mobility Component of Disability Living Allowance (DLA), Enhanced Rate Mobility Component of Personal Independence Payment (PIP), Armed Forces Independence Payment (AFIP), or War Pensioners’ Mobility Supplement (WPMS).
Motability Operations’ CEO, Andrew Miller, acknowledged the increased operational costs due to tax changes but emphasized the scheme’s commitment to enabling disabled individuals to maintain their freedom and independence. The government aims to save approximately £1 billion by 2030 through the Motability reforms.
Work and Pensions Secretary Pat McFadden highlighted the government’s focus on fairness for taxpayers and disabled individuals in implementing the changes to the Motability scheme, ensuring it supports mobility and independence while fostering a fair welfare system and economy accessible to everyone.