Disabled face changes to the Motability scheme as the Government pushes ahead with reforms it says will save taxpayers £1 billion by 2030.
The shake-up comes after ministers came under pressure over reports that some higher-end vehicles, including BMW and Mercedes models, were available through the taxpayer-backed scheme.
Chancellor Rachel Reeves removed some tax advantages for luxury Motability vehicles at last year’s Budget, and a new wave of changes is now being introduced.
What is changing for Motability cars?
Under the reforms, Motability customers who choose larger or more expensive vehicles and make optional upfront payments will now have to pay VAT on those payments.
In addition, all new Motability leases will be subject to Insurance Premium Tax, increasing costs for some customers.
Ministers say the changes are designed to protect public finances while keeping the scheme available for disabled people who rely on it for work, healthcare and everyday travel.
Government says changes are about fairness
“Today’s changes are driven by the fairness that underpins this Government – fairness for the taxpayer, fairness for disabled people and fairness for the country.
“We’re saving £1 billion of taxpayer money by removing VAT relief from some new Motability leases whilst ensuring the scheme still supports disabled people’s mobility and independence.
“We’re building a fair welfare system and an economy that works for everyone.”
Changes to the Motability scheme will ensure disabled people stay mobile and independent while delivering genuine value for taxpayers
Read about the changes https://t.co/MNXwAXoR4l pic.twitter.com/xsmrqRxGpW— Department for Work and Pensions (@DWPgovuk) July 1, 2026
Motability warns costs are rising
Motability Operations, the company that runs the scheme, said the tax changes announced by the Government had already increased the cost of operating the programme.
Chief executive Andrew Miller said: “Tax changes announced in the UK Government’s Autumn Budget have significantly increased the cost of running the Motability scheme.
“While we have had to make difficult decisions in response, the changes we are making mean the scheme can keep disabled people connected to freedom and independence now and in the future.
“The scheme continues to offer value for disabled people, including cars with no advance payment in addition to their weekly payments.”
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Why is the Government making the change?
The reforms are part of a wider drive to reduce welfare spending and encourage more people currently claiming sickness or disability-related benefits into work.
Ministers believe tightening some of the tax reliefs attached to the Motability scheme will help save around £1 billion by 2030.
The Motability scheme allows eligible disabled people to exchange qualifying disability benefits for a leased vehicle, scooter or powered wheelchair.
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