Major alterations to the Motability scheme are set to take effect for new leases beginning today as the company cites the need to counterbalance tax implications.
Motability, a program enabling individuals with disabilities to exchange their qualifying mobility allowance for leasing a new vehicle, scooter, or powered wheelchair, faces adjustments due to the VAT and Insurance Premium tax changes disclosed in the autumn Budget last November. These modifications, effective for most new leases ordered after July 1, 2026, are estimated to impose additional taxes amounting to £300 million on Motability’s operations. Consequently, the company has decided to revise its mileage allowances to mitigate these costs.
Starting today, new contracts will incorporate a yearly mileage limit of 10,000 miles, reduced from the prior 20,000 miles. Beyond this threshold, an additional charge of 25p per mile driven will apply, up from the previous rate of 5p per mile.
Furthermore, the allowance for tire replacements has been decreased from eight to six within a three-year lease period. For a five-year WAV lease, individuals can replace up to ten tires, of which up to six can be due to damage.
Additional requirements now include an administrative fee and mandatory notification to the RAC before traveling to the EU. Existing Motability leaseholders will remain unaffected by the recent changes until their current contract expires.
Recent adjustments to Motability also include the enforcement of mandatory “Drive Smart” black boxes for vehicles driven by individuals under 30 or new to the scheme, introduced in April 2026 but subsequently rescinded in May 2026 due to customer complaints about confusing regulations and inconsistent tracking app performance.
Luxury brand vehicles such as BMWs and Mercedes have been excluded from the scheme by Chancellor Rachel Reeves. To qualify for Motability, individuals must receive the Higher Rate Mobility Component of Disability Living Allowance (DLA), Enhanced Rate Mobility Component of Personal Independence Payment (PIP), Armed Forces Independence Payment (AFIP), or War Pensioners’ Mobility Supplement (WPMS).
Andrew Miller, the chief executive of Motability Operations, emphasized the impact of tax changes on the scheme’s operation, expressing the need to adapt to ensure continued support for disabled individuals’ mobility and independence.
Ministers anticipate saving £1 billion by 2030 through the Motability reforms, aligning with the government’s commitment to fairness for taxpayers, disabled individuals, and the nation’s overall welfare system.
Pat McFadden, the Secretary for Work and Pensions, underscored the changes as essential for upholding fairness, emphasizing the government’s goal to create an inclusive welfare system and a prosperous economy accessible to all.