Hundreds of thousands of disabled drivers across the UK are set to be hit with significant new costs after the government announced the removal of a vital financial discount. The change, confirmed in Chancellor Rachel Reeves's November Budget, will see the average upfront payment for a Motability scheme vehicle rise by around £400.
Budget Changes Target Motability Scheme
In a move that has sparked dismay among disability advocates, the Treasury confirmed that from July 2026, VAT will become applicable to Advance Payments for vehicles leased through the Motability scheme. Simultaneously, Insurance Premium Tax (IPT) will apply to Scheme leases.
The standard IPT rate of 12% will be levied on insurance policies for most new vehicle leases under the scheme. The Department for Work and Pensions (DWP) has stated that only cars 'significantly adapted for wheelchair users' will be exempt from this tax alteration.
Impact on Disabled Drivers and Campaigner Outrage
Motability, the company that runs the vast scheme which accounts for one in five new cars sold in Britain, has calculated the direct financial impact. They estimate the average Advance Payment—the initial upfront cost for a vehicle—will increase by approximately £400 over the standard three-year lease package.
Caroline Collier, from Inclusion Barnet’s Campaign for Disability Justice, expressed strong criticism of the decision. "This makes it all the more dismaying and unacceptable that the government in this budget has decided to go after Motability," she said.
Collier added, "Given that these are measures that will clearly reduce mobility for many disabled people, it seems that this is all about appeasement of a hostile press campaign rather than responsible policy-making." She did note that the absence of further social security benefit cuts was a success for disability campaigners.
Scheme Response and Future Steps
Following the Budget announcement, Motability issued a detailed statement outlining its planned response. The organisation confirmed that changes to the Scheme's package are expected to be introduced from July 2026.
Motability Operations, which runs the day-to-day scheme, will begin engaging with customers about the proposed changes in spring 2026. Crucially, the statement pledged that any proposed alterations to the leasing package will undergo a formal disability impact assessment by the Motability Foundation before being approved or implemented.
"As the Scheme evolves and we fully understand the impacts changes may have on disabled people, the Foundation will also need to consider how its grant programmes best support those most in need," the statement concluded.
