Last year, in the UK Government’s Autumn Budget, tax changes were announced that will affect the Motability Scheme.
From 1 July 2026, VAT and Insurance Premium Tax (IPT) will apply to leases on the Motability Scheme. As a result, leasing a vehicle will become more expensive and it will cost significantly more to deliver the Scheme. For customers who already have a lease on the Motability Scheme nothing is changing right now.
Changes to the Scheme apply across the UK, except in Scotland. We are working closely with Motability Operations and the Scottish Government to understand how these changes may affect customers in Scotland, and will provide a further update as soon as there is more news to share.
The Motability Foundation oversees the Motability Scheme, and we have worked closely with Motability Operations to consider how best to reduce the financial impact of the Government’s new tax arrangements on customers.
Motability Operations have carefully considered how to protect the core Scheme package, while ensuring the Scheme remains as affordable as possible and sustainable for the long term.
The Motability Foundation recognises that increased vehicle costs could significantly affect disabled people’s ability to access the Scheme.
We will continue to provide grants to Scheme customers, delivering our commitment to spend up to £650 million across all our activities by 2030. However, as part of the changing landscape, we are considering how our grant programmes best support disabled people with the funding we have available.
What is changing for new Motability Scheme leases?
These updates apply to new applications placed on or after Tuesday 1 July 2026.
If you already have a lease, nothing is changing for you right now.
VAT
When VAT applies to a lease, it will not be on the lease payments you make from your mobility allowance.
Instead, VAT will be applied at a standard rate to other lease payments such as:
Your Advance Payment
Excess mileage charges
Early termination fees
Mileage allowance
New leases will include:
Cars: 30,000 miles over three years.
Wheelchair Accessible Vehicles: 50,000 miles over five years.
Around three out of four customers drive within this new allowance, averaging around 7,500 miles a year.
Customers will be able to pay for miles over this allowance. We recognise that some customers may need to drive more miles for a variety of reasons, and we are currently looking at ways we may be able to mitigate the impact of these changes for customers in some limited exceptional circumstances.
Find out about mileage allowances.
Tyre replacement
From 1 July a Scheme lease will include:
Up to six tyres during a three-year lease, up to four of these can be for accidental damage.
Up to 10 tyres during a five-year lease, up to six of these can be for accidental damage.
On average, customers replace two tyres over the course of a three-year lease, and these new limits have been designed to cover what most customers need due to normal wear and tear.
EU breakdown cover
You can still take your vehicle abroad, but will need to ask the RAC for a VE103 form and pay an administration fee.
Fewer than one percent of customers used EU breakdown cover last year.
Learn about EU breakdown cover.
If you already have a lease
Nothing will change for you in your current lease at this time.
These updates only apply to new applications placed on or after 1 July 2026.
What is not changing?
Scheme leases will still include:
Insurance for up to three drivers.
Servicing and maintenance.
UK breakdown cover.
Support from the dedicated team of Scheme advisors.
What does this mean for me?
If you are unsure how these changes affect you, contact the Motability Scheme.
When considering changes, priority has been given to protecting what matters most to disabled people, reducing the impact of the tax changes as far as possible and providing good value.
Alongside Motability Operations, we remain dedicated to providing the Motability Scheme now, and for years to come, with a continued strong focus on customer service, affordability and choice.
For frequently asked questions and up-to-date information please visit the Motability Scheme changes hub.