The UK Government has officially confirmed a major change to the Motability Scheme that will take effect from July 2026. This update follows changes in national tax policy and will alter how certain costs within the scheme are charged. As a result, some Motability customers could face an additional cost of around £400 when taking out a new lease after this date.
The Motability Scheme plays a crucial role in supporting disabled people across the UK by helping them access reliable transport. For many users, the scheme is not just about convenience but about independence, employment, healthcare access, and daily living. Because of this, even small changes to costs can have a real impact on household budgets.
Although the new rules will not apply immediately, the confirmed date means customers now have clarity about what is coming. Understanding the reasons behind the change and how it could affect future leases will help users plan ahead and avoid unexpected financial pressure.
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What is the Motability Scheme?
The Motability Scheme allows eligible people to lease a car, scooter, or powered wheelchair using the mobility component of certain disability benefits. Instead of paying separately for insurance, servicing, repairs, or road tax, these costs are bundled into one package, making budgeting easier for users.
Many customers choose vehicles that fit their specific mobility needs, while others opt for standard cars that support work, family, and social commitments. In some cases, users pay an advance payment if they want a vehicle that costs more than their weekly mobility allowance covers.
Because the scheme is designed to be affordable and predictable, changes to pricing or tax treatment naturally raise concerns. That is why Motability and the Government have provided advance notice of the 2026 update.
Why the Government Is Making This Change?
The Government’s decision is linked to changes in how vehicle leasing schemes are taxed. From 1 July 2026, certain tax reliefs that previously applied to the Motability Scheme will be reduced or removed. This brings the scheme closer to standard leasing arrangements used elsewhere in the market.
Under the new rules, VAT and Insurance Premium Tax will apply more widely to Motability leases. The Government has stated that this move is part of a broader effort to simplify the tax system and ensure similar products are taxed in similar ways.
While the policy is not aimed specifically at Motability users, its impact is felt strongly because of how closely the scheme supports people with disabilities. This is why Motability has been working to clearly explain what the change means for customers.
How does the £400 Increase happen?
Motability has confirmed that the combined effect of VAT and Insurance Premium Tax could raise costs for some users. The £400 figure is an estimated average increase and is mainly linked to advance payments, not weekly benefit deductions.
Customers who choose vehicles that require an upfront payment may notice that this amount increases once the new tax rules apply. The exact figure will depend on the model chosen, the vehicle price, and market conditions at the time of ordering.
Importantly, this does not mean every Motability user will face higher costs. Those who select vehicles with no advance payment may see little or no difference, even after July 2026.
- The confirmed start date is 1 July 2026
- Only new leases starting on or after this date will be affected
- Existing leases will continue under their current terms until they end
Who Is Most Likely to Be Affected
The change is most likely to impact:
- Customers renewing or starting a lease after July 2026
- People choosing more expensive vehicles with advance payments
- Users who upgrade to higher-spec models in the future
Important Exemptions Still in Place
Not all vehicles under the Motability Scheme will be affected by the tax changes. The Government has confirmed that vehicles specially designed or heavily adapted for wheelchair or stretcher use will remain exempt from these new tax charges.
This exemption is particularly important for users with complex mobility needs who rely on specialist vehicles. It ensures that those who need the most support are protected from additional financial pressure. By keeping these exemptions in place, the Government and Motability aim to ensure fairness while still implementing wider tax reforms.
What Motability Has Said So Far?
Motability has reassured customers that the core structure of the scheme remains unchanged. Insurance, servicing, maintenance, and breakdown cover will still be included as standard, and eligibility rules will not be affected by the tax update.
The organisation has also explained that the changes apply only to new leases from July 2026 onward, giving customers time to prepare. Motability continues to review vehicle pricing regularly and says it will do what it can to keep costs manageable.
Clear communication will continue as the 2026 date approaches, especially for customers whose leases are due to end around that time.
What Customers Should Do Now
At present, there is no need for immediate action, particularly for those already on the scheme. However, customers may find it helpful to start thinking ahead.
Those planning to renew or order a new vehicle close to mid-2026 may want to explore options earlier. Staying informed through official Motability updates can also help users make confident decisions when the time comes.