Changes to the Motability scheme announced last November came into force last week. The changes include applying VAT to advance payments and adding insurance premium tax to insurance contracts on the scheme.
The changes were announced in November, when the government removed “luxury” vehicles, including BMW and Mercedes from the Motability scheme.
VAT will apply to the one-off top-up payments paid by claimants who need a more expensive vehicle, if they ordered from 1 July 2026.
The charge does not apply to wheelchair accessible vehicles
As readers pointed out when this plan was first announced, many Motability users need a larger car because they are unable to get in or out of smaller ones unaided. They will now be obliged to pay VAT on the extra money they have to find in order to obtain one of these cars.
Insurance premium tax at 12% is now payable on all new contracts on the Motability scheme.
There’s more information on these changes on the Motability site.
The mileage allowance for new contacts has also been reduced from 20,000 miles a year to 10,000 miles, whilst the excess mileage charge has increased from 5p per mile to 25p per mile. More information is available on the Motability site.
Work and pensions secretary Pat McFadden claimed:
“Today’s changes are driven by the fairness that underpins this Government - fairness for the taxpayer, fairness for disabled people, and fairness for the country.
“We’re saving £1 billion of taxpayer money by removing VAT relief from some new Motability leases, whilst ensuring the scheme still supports disabled people’s mobility and independence.
“We’re building a fair welfare system and an economy that works for everyone.”
Many readers may not agree.
