Motability £400 new 2026 cost replace as Treasury to reply

A petition against changes to the Motability scheme has surged meaning officials will have to issue a formal response amid concerns over big new charges for disabled drivers

View Image

A frantic campaign has launched attempting to prevent alterations to the Motability scheme taking effect in July, changes that would burden typical users with an additional £400. Backing has been surging for a fresh petition on the parliamentary website, propelling it beyond 10,000 signatures, which means the Treasury must provide an official response.

Should the petition reach 100,000 names, it will be considered for a parliamentary debate – putting ministers under scrutiny to justify the modification. Chancellor Rachel Reeves revealed in her November Budget that VAT would be applied to Advance Payments, while Insurance Premium Tax would cover Scheme leases. Motability has stated the taxation alterations mean the typical Advance Payment (initial expense) for a vehicle will rise by approximately £400.

The petition, accessible here, and boasting over 16,000 supporters, urges the Chancellor to: “Stop proposed changes to the Motability Scheme. The recent budget has announced taxes on advanced payments and a decrease in mileage allowances. We believe this is unfair to the most vulnerable in society and could affect their independence.

“Many disabled people earn considerably less than average and a cost increase could mean they struggle to get a car. Many disabled people also need to use their car for short journeys, where others may be able to walk, and mileage soon adds up because of this.

“While those residing in major cities might potentially depend on public transport, public transport is frequently scarce in countryside locations, which could possibly strip away people’s independence.”

Vehicle leasing firm for disabled individuals, Motability, contacted all customers last week announcing it would implement ‘alterations’ amid worries of a £400 increase on average for users due to fresh taxation. Disabled people utilising Motability are poised to encounter steeper expenses as the car leasing programme attempts to counterbalance £300 million of additional taxes following last year’s budget.

The Motability organisation announced today it will modify mileage entitlements, fees for extra mileage and introduce charges when vehicles are driven overseas. Customers might also encounter a rise in upfront payments valued at up to £400 when beginning their fresh lease.

This occurs against a background of intense political examination of the programme, which permits certain individuals receiving disability benefits to redirect some or all of their payments towards leasing a new car or accessible vehicle.

On Thursday, chief executive of Motability Operations, Andrew Miller, informed scheme participants that it would implement modifications to address the expense. “Together, these tax changes mean it will cost significantly more to run the scheme,” he stated in a correspondence.

“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.” He outlined plans to reduce the annual mileage allowances, increase excess mileage fees, change tyre replacement limits and introduce a charge for taking cars abroad.

It’s understood that customers securing fresh leases following July 1 will witness an average rise to upfront payments of between £300 and £400. Nonetheless, numerous new motors within the programme won’t require an upfront payment.

The programme, which exclusively covers those entitled to the higher or enhanced rate of the mobility element of disability benefit, serves approximately 890,000 individuals. Yet the scope and expense of the initiative has attracted substantial criticism.

Last month, Reform UK declared its intention to implement sweeping reforms to Motability to “end the abuse” of the programme. In last year’s autumn budget, the Chancellor revealed that the programme would no longer feature “luxury cars” such as BMW and Mercedes-Benz models.

Rachel Reeves also revealed the Government would impose VAT on upfront payments for the programme, and apply insurance premium tax to leases from July 2026. The DWP has announced that the alteration will take effect from July 1 – meaning individuals must place their orders before this deadline or face paying approximately £400 additional costs. During a recent parliamentary inquiry, MP Neil Duncan-Jordan questioned Chancellor Rachel Reeves: “What assessment she has made of the potential impact of limiting the relief from insurance premiums under paragraph 3 of Schedule 7A to the Finance Act 1994 on disabled people.”

To be eligible for a Motability vehicle, an individual must be receiving the higher/enhanced rate of a mobility benefit, such as PIP, DLA, or AFIP, with a minimum of 12 months remaining on their award.

Dan Tomlinson, Exchequer Secretary to the Treasury, confirmed the key date and explained the modifications were designed to reduce expenditure: “At Budget 2025, the government announced reforms to the Motability scheme, which will save over £1 billion over the next five years.

“The VAT relief for top-up payments made to lease more expensive vehicles will be removed for new leases from July 2026, and Insurance Premium Tax will apply at the standard rate to insurance contracts on the Scheme. The VAT reliefs on weekly lease costs and vehicle resale will remain in place, and the tax changes will not apply to vehicles designed, or substantially and permanently adapted, for wheelchair or stretcher users.

“These tax changes ensure Motability can continue to deliver for its customers, for example, through the continued provision of a broad range of vehicle models available without any top-up payments.” The Disability Rights UK organisation stated it won’t affect all users: “At the Autumn Budget, the Government confirmed that Value Added Tax (VAT) will apply to Advance Payments and Insurance Premium Tax (IPT) will apply to Scheme leases. These changes will take effect from July 2026. The Government have confirmed that VAT will not be added to wheelchair accessible vehicles.

“These tax changes will mean the overall cost of providing the Scheme will become more expensive but will remain sustainable with a choice of affordable vehicles for those who use it. The Motability Scheme will seek to make changes to the leasing package so that these additional costs can be absorbed where possible.”

To view and sign up to the petition click here.