The Department of Work and Pensions (DWP), UK, has validated significant modifications to the Motability Scheme which will begin in July 2026. These reforms imply that advance payment towards a new car can be increased on average £400 on the scheme by many disabled individuals over a normal three-year lease.
The cause of the change is the introduction of new regulations on VAT and Insurance Premium Tax on vehicles on Motability Scheme. This article describes the change, and when it begins, and to whom it may apply and what assistance may still be offered, in a very basic and understandable manner.
What Is The Motability Scheme?
The Motability Scheme enables disabled individuals who are aged at least 16 and who have an additional higher rate mobility payment (such as PIP, ADP, DLA, or Armed Forces Independence Payment) to take one out on leasing a car, scooter or powered wheelchair. Rather than purchasing and upkeep a vehicle themselves, the customers make a fixed payment with their mobility benefit and the scheme will take up most of the running expenses.
The standard Motability lease usually includes:
The three-year (or five-year) lease of the vehicles when it comes to the Wheelchair Accessible Vehicles.
Repairs, servicing and maintenance, insurance.
Breakdown and tyre change insurance.
Some accommodations to the disabled motorists and passengers.
Special tax reliefs have been funding this package over the years and this made it cheaper to lease a vehicle by the disabled persons.
What Is Changing From 2026?
Since 1 July 2026, the government will amend tax reliefs which is received by vehicles leased on the Motability Scheme. Two important changes have been verified:
The advance payments towards the Motability leases (which were earlier exempted in a special manner) will come under VAT.
The insurance component of Motability lease will be subjected to Insurance Premium Tax (IPT).
This new taxation has been verified by motability and the DWP as it will result in higher costs of leasing a vehicle in the scheme especially in terms of the advance payment averages. The weekly lease rate that you are charged off your mobility benefit will remain largely unchanged, however, the initial purchase price of most vehicles will increase.
The £400 Hit: Its Real Meaning.
With the new tax rules, Motability has cautioned that the average Advance Payment will grow on an average of £400 within a three year leasing arrangement due to the tax changes. It is not that all cars will be an additional £400 more expensive, but on average throughout the range will it increase by the amount of £400.
The £400 amount is important in that most disabled individuals already have a hard time saving an advance payment on top of their daily living expenses. The additional £400 during a three-year cycle may imply less options or postponements in switching the vehicles among some clients.
Key Dates And Timeline
The changes in Motability have been outlined by the government and DWP with the most important date of 2026.
Motability change timeline
The mid-term leases are not going to be changed. The new regulations and £400 hit will primarily impact on new leases or renewals that commence on or after 1 July 2026.
Who Will Be Affected?
£400 Motability change is best applicable to individuals who:
- Lease a car or Wheelchair Accessible Vehicle (WAV) under the Motability Scheme.
- Make an Advance Payment to obtain a particular model or spec.
- Renew or commence a new lease after July 2026 or not
Individuals leasing scooters or powered wheelchairs can also change, but the magnitude of the increase will be determined by product type and how it is taxed. Motability has also indicated that it will continue to offer a variety of 40-50 cars with no initial payment, to cushion against the cost on people with lower incomes.
People who use their Motability car on a regular basis to go to work, to medical appointments or take care of someone with a disability may also experience the impact the most, when they are required to have a larger or specially adapted vehicle which would have a higher Advance Payment.
What Will Stay The Same?
Even with the new taxes, a number of key elements of the Motability Scheme will continue to exist as they are now:
- The scheme will still enable the customers to redeem their mobility benefit of higher rate to a lease package.
- Insurance, service, breakdown cover and tyre change and numerous adaptations will continue to be part of the under-pack.
- The weekly cost deducted currently on PIP mobility, ADP, DLA or other qualifying benefits is likely to be kept constant, and the chief shift would be on the upfront Advance Payment instead.
Motability and Motability Foundation have emphasized that the fundamental reasons behind the need to enable the disabled by safe reliable mobility will not alter with the changes in the scheme as it is set to evolve to meet current tax regime.
What Are the Reasons of These Changes?
These modifications are based on rulings made by the government in the Autumn Budget and are a result of an increased analysis of tax reliefs regarding the leased vehicles of the disabled. According to ministers, the reform will make disabled motorists receive a better value despite the fact that they will continue to provide a high level of support to the taxpayers.
But disability organizations and individual M£ have expressed concerns that the introduction of VAT and Insurance Premium Tax to Motability leases would further disadvantage more disabled people, as some would have limited finances and rely on their car to remain independent. This has seen additional protections and grants being demanded on the lowest income earners.
Motability And DWP Respond.
The DWP has confirmed in written responses to Parliament both the commencement date of the changes and the anticipated effect of the changes, such as the £400 average rise in advance payments. The Department has also assured that it is constantly communicating with Motability Operations and the Motability Foundation concerning the way it can mitigate the effect on the customers with disabilities.
Motability has said that it:
- Appreciates the fact that scheme changes under tax relief necessitate that scheme evolve.
- Will strive to restrain increase in prices as much as possible.
- Will have a range of no-advance-payment cars.
- Will will consider its grant programmes in order to support those who are in the need of support the most.
These promises aim at cushioning the impact of the increased tax burden on scheme holders.
Support, Grant And Assistance To Customers.
The Motability Foundation grants grants to assist consumers who can not afford the vehicle or adaptations they require, and has mentioned that its grant programmes will be reviewed and might be amended in accordance with the changes of 2026. These grants can help cover:
- Higher Advance Payments on larger or specially converted cars.
- The wheelchair hoists, hand controls, or swivel seats are the necessary adaptations.
- These are other expenses in which the needs of a disabled individual cannot be covered under the normal package.
Any customer who feels that he or she will not afford the £400 rise in the advance payment should take into account:
- Getting in touch with Motability at the earliest opportunity to talk about cars and affordability.
- Inquiring about grants that are available and application.
- A review of the availability of an appropriate no-advance-payment vehicle that will satisfy their requirements.
This will be needed especially among those whose lease will expire around mid 2026 or the near future.
Other New Motability News You Got to Know.
Other significant scheme updates that could have an impact on planning include:
The New Vehicle Payment (NVP) of £750 that many customers used to discount their Advance Payment is no more available to new-to-scheme customers whose initial purchase is ordered on or after 4 January 2025.
The current customers who are yet to receive New Vehicle Payment can still receive it during their next renewal, but it is a one-time payment.
It will imply that certain individuals are subjected to a two-fold burden: lose the £750 NVP to new customers and then on average the £400 hike in the advance payments every July 2026 as a result of tax reforms. Budgeting and early counsel will then be significant.
Real-World Measures To Be Ready in 2026.
To be ready to the DWP Motability rule change and the approaching £400 hit, disabled drivers and their families can take a few easy ste£ at the moment:
Check your lease end date
Provided that the end of your existing Motability lease is approaching near or around July 2026, you need to discuss with Motability your options way in advance.
Review your vehicle needs
Determine whether you actually require a more expensive model with a large Advance Payment, or it might be able to fulfill your needs through a cheaper or no advance payment vehicle.
Plan your budget
Consider in advance how an additional £400 in three years can impact on your savings, and whether you should start saving money now.
Ask about grants
On a low income or with complicated mobility requirements, call the Motability Foundation to find out whether you can receive financial assistance.
Stay updated
Continue monitoring Motability and DWP sources of official guidance, particularly around the beginning of Spring 2026 and an increasing amount of customer data leaks out.
The Fact Check: DWP Motability £400 Change.
The DWP has confirmed a major Motability change from 2026 through parliamentary statements and official updates, which state that VAT and Insurance Premium Tax will apply to Motability leases starting 1 July 2026, altering the scheme’s cost structure. Motability has publicly stated that these tax changes will raise the average Advance Payment by around £400 over a typical three-year lease, though this is an average figure some vehicles may increase by more, some by less, and no-advance-payment options will remain available. Current leases will not face immediate changes mid-term, as Motability has assured that the new rules only affect new or renewed leases from July 2026 onwards, and help remains accessible since the Motability Foundation runs grant schemes that it plans to review to support those in greatest need as the scheme adapts
FAQ’s About The 2026 Motability Change.
How will the significant Motability change that will commence in July 2026?
VAT and Insurance Premium Tax will be charged on all eligible Motability leases beginning 1 July 2026 which is likely to add approximately £400 to the average Advance Payment of a three-year lease.
Will it affect my existing Motability lease?
No, there will be continuance of existing leases on the same terms. The modifications refer to new leases and renewals that start in July 2026 and further.
Will my £400 raise have any impact on my PIP payment or some other benefit on a weekly basis?
The primary effect will be on the initial Advance Payment, which will not be on the weekly lease amount deduced out of your mobility benefit. Precise prices will even rely on the kind of vehicle you take.
Are cars with no Advance Payments still there?
Yes. Even following the tax changes, motability has indicated that there will always be approximately 40 to 50 vehicles with no initial payment.
I can not afford an increased Advance Payment. Can I get help?
You can potentially be granted a grant provided by the Motability Foundation should you fit their requirements particularly when you require a particular kind of vehicle or disability-related adaptation.
What is the Motability Scheme? Can I know whether I hold eligibility in it?
You should have a qualifying higher rate mobility benefit like PIP enhanced mobility, ADP higher mobility, DLA higher rate mobility or some armed forces benefits and not have used the full amount of award time on your claim.
Is £750 New Vehicle Payment terminated?
The £750 New Vehicle Payment is no longer provided to new customers ordering their first payment on or after 4 January 2025, although the existing customers can continue to receive it at their next renewal, once only.