The Department for Work and Pensions has confirmed that some specifically adapted cars won’t be included
The Department for Work and Pensions has provided an update on upcoming changes that will hit the average Motability customer with an additional £400 bill. During November’s Budget, Chancellor Rachel Reeves announced that VAT would be slapped on Advance Payments from July 2026, whilst Insurance Premium Tax would also be applied to Scheme leases – however officials have not confirmed that some vehicles will be exempt.
Motability, the firm running the massive programme that represents one in every five car sales across the UK, has calculated that typical Advance Payments – the upfront costs for vehicles – will surge by roughly £400 across three-year packages.
A Labour MP has raised concerns about the financial strain on disabled people, with Neil Duncan-Jordan questioning Work and Pensions Secretary Pat McFadden: “Whether he plans to publish a consultation on the VAT treatment of Motability scheme vehicles.”
In response, Sir Stephen Timms, Minister of State (Department for Work and Pensions), explained the DWP’s intention to implement the changes swiftly – meaning no consultation would take place.
He stated: “The government recognises the importance of engaging with tax payers on the development of tax policy, however, as set out in the tax policy making principles, the need to deliver change quickly means a consultation is not always practicable. Prior to announcing tax changes to the Motability Scheme at Budget 2025, the government instead engaged closely with the Motability Foundation to understand in depth how tax changes would impact the Motability Scheme and their customers. There are no plans for further consultation on the measure.”
Last week, the DWP confirmed that vehicles ‘substantially adapted for wheelchair users’ would remain unaffected by the tax alteration.
Labour’s Ruth Jones posed a written question to Mr McFadden: “What assessment has he made of the potential impact of the Government’s changes to the Motability scheme on wheelchair users who do not use a wheelchair accessible vehicle.”
Sir Stephen indicated that grants might be available in certain circumstances: “The Motability Scheme is a lifeline for many disabled people and families, supporting their independence by enabling them to lease a car, wheelchair accessible vehicle, scooter or powered wheelchair in exchange for an eligible disability benefit allowance.
“Before any announcements were made, Motability Operations confirmed it will continue to offer a broad range of vehicles without an Advance Payment. This will ensure that people who elect to join the Scheme can access vehicles suited to their needs, whether that’s a larger vehicle or extra boot space to carry wheelchairs, whatever their health condition or disability, in exchange for all or part of their mobility allowance.
“Motability Foundation will continue to offer means-tested grants to those most in need of financial help. These grants support eligible people who would otherwise struggle to afford the advance payment or adaptations for a vehicle, or a wheelchair accessible vehicle (WAV) through the Motability Scheme.”
Regarding the consequences of the tax alterations, Mr Duncan-Jordan also enquired: “What assessment he has made of the potential financial impact of the proposed (a) application of VAT on payments for higher value vehicles and (b) removal of the Insurance Premium Tax exemption for vehicles that are not substantially and permanently adapted for wheelchair or stretcher users, or originally designed for their use on Motability scheme users; and what steps his Department is taking to support disabled people who will be affected by these changes.”
Sir Stephen stated: “The package of reforms to the Motability Scheme announced as part of the Budget will ensure the Scheme delivers fairness for the taxpayer, while continuing to support disabled people. The Scheme will continue to offer a choice of affordable vehicles to meet a range of accessibility needs and offer vehicles which require no advance payment, meaning that people will be able to access a suitable vehicle using only their qualifying disability benefit. Insurance Premium Tax (IPT) will apply to leases at the standard rate, bringing tax treatment in line with commercial leasing firms.
“Existing leases and vehicles substantially designed for, or adapted for, wheelchair or stretcher users will continue to benefit from VAT reliefs on advance payments and the IPT exemption, in recognition of the additional costs associated with these vehicles. Motability Foundation, the independent charity with responsibility for overseeing the Scheme, will continue to offer means-tested grants to support eligible people who would otherwise struggle to afford the advance payment.”
Following the Budget, Motability issued a statement outlining their plans and pledged: “Changes to the Scheme’s package are expected to be introduced from July 2026. Motability Operations, which runs the Scheme, will begin engaging with customers about the proposed changes in spring 2026. Proposed changes to the leasing package will undergo disability impact assessment by the Motability Foundation, which oversees the Scheme, before any changes are approved, announced and implemented. As the Scheme evolves and we fully understand the impacts changes may have on disabled people, the Foundation will also need to consider how its grant programmes best support those most in need.”
To read the full response click here.
