8:29 am, March 27, 2026
Changes to the Motability scheme are set to leave disabled drivers facing higher bills, as the system continues to face fierce political scrutiny.
Bosses at Motability say the firm needs to offset £300m of new taxes, imposed following last year’s Budget, with costs – in part, at least – set to be passed on to users.
Going forward, the scheme is making changes mileage allowances, charges for additional mileage and introducing charges if vehicles are taken abroad.
Users could also face an increase in advance payments worth up to £400 at the start of their new lease.
The changes come as the Motability Scheme continues to come under the spotlight for its breadth and cost.
Last month, Reform UK said it planned to make sweeping changes to Motability to ‘end the abuse’ of the scheme.
In last year’s autumn budget, the Chancellor announced that the scheme would no longer use ‘luxury cars’ such as BMW and Mercedes-Benz vehicles.
Rachel Reeves also announced the Government would introduce VAT to advance payments for the scheme, and apply insurance premium tax to leases from July 2026.
Motability estimates that the policies will hit the business with £300 million in additional taxes.
‘Together, these tax changes mean it will cost significantly more to run the scheme,’ Andrew Miller, chief executive of Motability Operations, said in a letter to customers.
‘If we did nothing, the average cost of a new lease would increase by around £1,100.
‘It was clear to me that simply passing all these costs on to customers was not an option.
‘We had to carefully consider how to reduce the tax impact as much as possible but also, focusing on changes that reflect how most customers already use their vehicles.’
It is understood that customers taking new leases after July 1 will see an average increase to advance payments of between £300 and £400.
