Motability Scheme Changes Confirmed for July 2026

A series of significant changes to the Motability Scheme will come into effect from 1 July 2026, impacting new vehicle orders across the UK.

The updates follow Government tax reforms announced in the Autumn 2025 Budget, which introduce new costs to the Scheme. Motability says the changes are designed to keep the programme “affordable and sustainable” for the long term.

Importantly, existing customers will not be affected until they renew their lease.

What’s Changing from 1 July 2026

Customers placing a new Motability order from July will see several key changes:

•VAT on Advance Payments introduced
A standard 20% VAT will now apply to Advance Payments (vehicle upfront costs) where previously they were tax-free

• Insurance Premium Tax added
Vehicle insurance included in the Scheme will now be subject to 12% Insurance Premium Tax on most leases

• Typical upfront costs expected to rise
Advance Payments could increase by around £300–£400 on average depending on the vehicle

• Reduced mileage allowance
Standard leases will reduce to 30,000 miles over three years (10,000 per year)
Wheelchair Accessible Vehicles (WAVs) will reduce to 50,000 miles over five years

• Higher excess mileage charges
Charges for exceeding mileage limits will rise significantly to around 25p per mile

• Tyre replacement limits introduced
New leases will include up to six tyres over a three-year agreement (with limits on damage replacements)

• New overseas travel admin fee
Customers will need to pay an administration fee (around £22) for documentation when taking vehicles abroad

​What's Staying the Same

Despite the changes, the core Motability package remains intact:

• Insurance for up to three drivers
• Servicing, maintenance and repairs
• Breakdown cover
• Ongoing customer support

These key benefits will continue to be included within the lease.

Why the Changes Are Happening

The updates are primarily driven by new Government tax rules, which remove longstanding tax exemptions and increase the cost of running the Scheme by an estimated £300 million per year.

Motability has introduced the changes to offset these costs while maintaining access to vehicles for eligible customers.

Who Is Affected?

• New customers or renewals from 1 July 2026 onwards will be affected
• Existing lease holders will see no immediate change until their agreement ends
• Eligibility for the Scheme remains unchanged, continuing to be based on qualifying mobility benefits

For more information, please get in touch.