What changes to the Motability Scheme mean for you

With several significant changes having been applied to the Motability Scheme, it’s sensible to ask how this will affect customers.

Here is our analysis, as well as that of key figures in the disability motoring sector, regarding recent changes to the Motability Scheme.

 

VAT on advance payments and Insurance Premium Tax

Perhaps the headline change announced during the budget in November last year was that VAT will now be added to advance payments (upfront costs) and Insurance Premium Tax (IPT) from July 2026.

What does this mean for Motability customers?

In simple terms, these tax changes will increase the overall cost of providing the Scheme. In practical terms, the choice of cars people can afford will likely decrease. There may be fewer nil advance payment models available on the scheme and advance payments across the scheme will probably rise. Disabled people face significant barriers to accessing public transport, which impacts every area of life from access to work, healthcare and daily living. Sadly, making access to the Scheme less affordable can only worsen the challenges already faced by disabled people.

 

Why have these changes been made?

These changes are expected to be worth over £300 million to the Exchequer but it feels more personal than that. Combine the changes to the Motability Scheme with the upcoming changes to Universal Credit (UC) health element for future claimants and it feels like support for disabled people is being radically stripped back by the current government.

 

Premium brands removed from the Scheme

Sadly, choices from Audi, BMW, Mercedes-Benz, Alfa Romeo, and Lexus have been removed with immediate effect, as have many of the coupes and convertibles available from other marques on Motability. In a sense, this does little to stem the perverse paradigm that disabled people are somehow ‘unworthy’ or worse still, ‘scroungers’. Removing premium brands will not make the Scheme more affordable; it will only remove options that are unaffordable to some members. It also, however, removes choices and goodness knows, disabled people face enough of that already. Removing choice from the Scheme could unintentionally signal that the Government feels that disabled people are undeserving of aspirational choices and paves the way for cynics to push for further tightening of support for disabled people in the future.

 

Why has this change been made?

It’s hard to say that this change has been made for any other reason than political optics. No single car on the Scheme would have cost the public purse any more than another at base level since the customer’s advance payment balances the cost.

 

Do these changes also effect WAVs?

Wheelchair accessible vehicles (WAVs) will be exempt from the new adjustments concerning either IPT or VAT on advance payments. (Worth also pointing out is that if you fund a mobility scooter or other mobility aid through Motability, there are no changes to the Scheme. Though the usual price reviews will continue to ensure the long-term sustainability of that aspect of it.)

 

How are Motability addressing these changes?

The Scheme will be reviewing it’s offering to customers over the next six months to understand the impact of the changes and how they can best support them once they come into play, though CEO of Motability, Andrew Miller, is keen to emphasise that: “First and foremost, the way we think about the Scheme and the organisation is from the perspective of the customer. So, we will be trying to manage all the changes with as little disruption to the customer as possible. That’s vital, given the role we play and given the sensitivities that many of our customers feel about the importance of a car to them.

“VAT exemption has been removed on insurance and VAT has been applied onto advance payments for the cars, so that’s going to be worth about £300m to the Exchequer – and that’s potentially about £1,000 added to the cost of a lease. So, the immediate task for us is to understand how much of that £1,000 we can mitigate by changing our offering to customers to try to alleviate that. We’re confident that we can alleviate a large amount of that but there will be an element, ultimately, that has to be picked up by the customer.”

Naturally, Motability is attempting to minimise the impact of price increases for their customers, so they’ve started to look at measures to make savings, such as in how their insurance premiums are calculated, as Miller explains: “Insurance is the biggest cost of the Schene right now. We spend £1.4billion a year paying out claims either caused by our customers or caused to our customers by other people.

“Because we offer one insurance charge for everyone, we have to make sure that everyone, particularly younger drivers, are using the Scheme in the right way, in the choice of cars they’re given, and that’s hard. We’ve been running telematics for a month or two, and already we’re seeing a big improvement in driving scores and therefore, a lowering of insurance costs. Customers need to remember that it’s a collective in many ways and the impact of one customer will impact everyone else.”

 

Will Motability face further challenges in the future?

In the slightly longer term, Motability also faces a difficult transition to electric vehicles (EVs) of which Andrew Miller is clearly worried, saying: “There’s a mandate on manufacturers that 30% of their cars have to be EVs and we’ve been told that the take-up on the Scheme must be similar for them to give us the same kind of choice. The reality is that the choice of cars is coming down in a way because of the EV transition. We think that will improve because the visibility we have over the next three to five years suggests there’ll be much more choice coming into the value range of EV cars.” However, Miller goes on to highlight that: “Everyone’s currently transfixed by the Government’s intervention, but they need to keep their eye on the EV transition. We know that 70% of our customers can’t have a charger at home and that they’ll have to charge on the road, which is incredibly difficult under the current infrastructure. Our customers live in more rural and semi-urban areas where the charging infrastructure has not been built. That really makes me angry, so we’re going to help our customers as much as we can to figure a way through this by having the right choice of cars that fit those needs – and again that’s difficult.

We’re in this together. We’re trying to manage a very difficult transition in the car industry and other cost of living pressures on behalf of customers. The more we can work with our customers to solve these problems, the better. But what is certain is that the choice they’ve had will not be there for the next few years while we navigate through all of this stuff.”

 

What does the Scheme look like in 2026?

As we start 2026, the Motability Scheme operates in much the same way it has for many years. There are around 865 vehicle choices from around 30 manufacturers – with new interest from brands such as BYD and Jaecoo providing a note of optimism. Motability customers will also be relieved that the core components of the Scheme remain intact, including: insurance, servicing, 24/7 breakdown cover, tyre replacement, named drivers and good condition bonus – and for those drivers who are looking for continued value for money support from the Scheme, the reassurance that (as of January 2026) there are 39 cars with nil advance payment and 103 more with advance payments under £500.

Visit: www.motability.co.uk

 

Tackling misuse

Elsewhere, although what might be described as ‘disability benefit fraud’ and indeed ‘Motability fraud’ are incredibly low level compared with other types of fraud, a new Special Investigation Unit will be created to combat abuse of the Scheme. Motability Operations also plans to strengthen data-sharing arrangements with government and police agencies to make investigations more efficient and robust, though again says that numbers relating to misuse are incredibly low – so it seems that this will sadly have minimal impact regarding cost savings.

 

Comment from key figures in the disability motoring sector

Peter Facenna, MD of Allied Mobility and Chair of WAVCA.

“I was pleased that there aren’t any changes for the 4% of the Scheme that I’m involved in with Allied Mobility and WAVCA. In terms of those, the small number of Mercedes WAVs that are available, for example, are still available, nor is there going to be any VAT charge for the advance payment.

The most important element of what the Scheme offers is wheelchair accessible vehicles, so I was pleased that that wasn’t impacted. But whether there’s a knock-on effect down the road where the changes affect the overall economics of the Scheme, then ultimately, you know, the 96% will, no doubt, affect the 4%. That’s a concern going forward, but we’ll just have to see how that plays out.

Obviously, the changes are going to make things more challenging for Motability. The vehicles that we and the rest of the WAV industry provide are not an aspirational purchase, they’re a necessity! I’d like to think that people will still, no matter what, be able to get a WAV.

I certainly still believe that WAVs should always be available; that they should be affordable and that there should be choice. One thing I can say for certain is that the WAV business in the UK is world-leading – with world-leading safety standards and innovations, so it’s really important that it is protected.”

 

Dan Fellows, Marketing Manager, Jubilee Automotive Group

“The Motability Scheme remains a vital support system for many disabled people. At Jubilee, we provide an alternate route to mobility by specialising in private purchase new and used wheelchair accessible vehicles, offering choice for customers who prefer to own rather than lease, or who may find eligibility or lease terms restrictive. While we don’t offer vehicles through the Scheme, we recognise its importance for those who rely on it and its wider role within the vehicle ecosystem, so any disruption to the Scheme is a concern.

While wheelchair accessible vehicles have been ring-fenced from recent changes, we have noted increased uncertainty among customers about the Scheme’s overall direction. If people feel that changes are being driven in response to public perception rather than lived experience, confidence is undermined. It is more important than ever that the wider conversation remains focused on empowerment, independence, and recognising the significant contribution disabled people make to society.”

 

Matt Fieldhouse, Group Managing Director at Mobility in Motion

“The Motability Scheme has transformed the lives of millions of disabled people, and its core purpose remains as vital today as it has ever been. While recent changes have understandably created uncertainty for some customers, our commitment at Mobility in Motion is unchanged. We continue to work closely with Motability Operations and all our partners to ensure customers receive clear guidance, expert support and high-quality vehicle adaptations that meet their needs. The Scheme continues to play a crucial role in enabling independence, and we are focused on helping both Motability customers and our own customers navigate change with confidence, reassurance and practical solutions that support their freedom through car travel.”