Motability Scheme users face higher costs following Autumn Budget news of major tax changes
Disabled people using the Motability car leasing scheme are set to face higher costs as the organisation seeks to offset £300 million in new taxes introduced in last year’s Autumn Budget.
Changes include revised mileage allowances, new charges for taking vehicles abroad, and advance payment increases of up to £400 for new leases starting after July 1.
The Motability Scheme, which today released its latest price list for April to June 2026, allows people receiving certain disability benefits to direct some or all of their payments toward leasing a new car or accessible vehicle.
Eligibility is restricted to those entitled to the higher or enhanced rate of the mobility component of disability benefit, and the scheme is currently used by around 890,000 people across the UK.
The changes come from decisions made in Rachel Reeves’ Autumn Budget. The government announced it would introduce VAT on advance payments for the scheme and apply insurance premium tax to leases from July 2026.
Chancellor Rachel Reeves also announced that the scheme would no longer use “luxury cars” such as BMW and Mercedes-Benz vehicles. Motability says these combined measures will cost the business £300 million in additional taxes.
Andrew Miller, Chief Executive of Motability Operations, recently commented in a letter to customers: “Together, these tax changes mean it will cost significantly more to run the scheme,” he said in a letter.
“If we did nothing, the average cost of a new lease would increase by around £1,100. It was clear to me that simply passing all these costs on to customers was not an option.
“We had to carefully consider how to reduce the tax impact as much as possible but also, focusing on changes that reflect how most customers already use their vehicles.”
Andrew Miller outlined plans to reduce the annual mileage allowances, increase excess mileage fees, change tyre replacement limits and introduce a charge for taking cars abroad. Customers taking new leases after July 1 will see an average increase to advance payments of between £300 and £400.
