Motability Scheme Overhaul: Mileage Allowance Halved and Excess Charges Soar
A 'seismic' rule change has taken effect for individuals receiving Personal Independence Payment (PIP) and Disability Living Allowance (DLA) who participate in the Motability Scheme. The scheme enables disabled people to use a portion of their disability benefit to lease a vehicle, which many depend on for work, health, and daily activities. From 1 July 2026, new mileage limits and higher insurance excess charges have been introduced across the UK, a move Motability states is necessary to manage escalating costs.
Key Changes: Mileage Allowance Cut in Half
Under the new rules, the standard annual mileage allowance for new Motability leases has been reduced from 20,000 miles to 10,000 miles per year. Drivers who exceed this allowance will be charged 25 pence for every additional mile, a fivefold increase from the previous rate of 5 pence per mile. These changes apply to new leases starting from July 2026.
Impact on Advance Payments and Lease Costs
Tom Preston, CEO at Hippo Leasing, described the changes as a 'seismic shift' for disabled motorists. He explained that an average increase of approximately £400 on Advance Payments, combined with the reduced mileage allowance and higher excess charges, means many drivers will be priced out of the scheme. Those renewing may face the difficult choice of accepting higher costs or leaving the scheme without a vehicle.
Motability Defends Changes Amid Rising Costs
Motability has defended the changes, stating that lease costs could otherwise increase by around £1,100 over three years. The new measures are intended to reduce that increase to about £400 on average. The organisation attributes the changes to tax measures announced in the UK government's autumn budget, which it estimates will add approximately £300 million a year to the cost of running the scheme by the end of the decade.
Official Statement from Motability
A Motability spokesperson said: 'We know how important a vehicle is for our customers to live independently.' The spokesperson emphasized that the adjustments are a response to rising operational costs and government-imposed tax reforms, including VAT and Insurance Premium Tax changes.
