The Department for Work and Pensions (DWP) is set to shield four groups of Personal Independence Payment (PIP) and Disability Living Allowance (DLA) claimants from new changes to the Motability Scheme that take effect from July 1, 2026. Motability Operations is updating lease terms, including adjustments to mileage allowances and tyre replacement allowances.
From Wednesday, July 1, 2026, Value Added Tax (VAT) and Insurance Premium Tax (IPT) will apply to most new leases. Andrew Miller, Chief Executive of Motability, explained: "We have taken careful steps to manage these additional costs to keep the Scheme affordable and sustainable for the long term. Our priority has been to protect what matters most in your lease, reduce the impact of the tax changes, and maintain the good value of the Scheme."
He added: "Together, these changes mean it will cost significantly more to run the Scheme. 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 focus on changes that reflect how most customers already use their vehicles."
However, not everyone will be affected. Motability has confirmed that four groups are exempt from the new charges:
- Current leaseholders: If you already have a car, nothing changes until your current lease ends.
- Those who have placed orders: If you place an order before July 1, 2026, you will lock in the current price and terms, even if the car is delivered after that date.
- Wheelchair Accessible Vehicles: These remain exempt from the new VAT and IPT charges to protect those with the highest needs.
- Scotland users: The Scottish Government is still reviewing how this affects the AVES scheme in Scotland.
Mr Miller stated: "These updates will apply only to new orders placed on or after July 1, 2026. Full details of the changes, along with information about the support available, can be found on our website. Thank you for being part of the Motability Scheme, and for the trust you place in us."
