The Department for Work and Pensions (DWP) has issued an important update regarding the Motability Scheme—a government-backed programme that helps disabled people lease vehicles using their disability benefits. Starting from July 2026, the scheme will see several significant changes, including a £400 increase in the average Advance Payment, due to new tax rules.
These changes come alongside political debate over who should qualify for the scheme, with growing concern over access by people with mental health conditions, and efforts to refocus the programme on those with more severe physical disabilities.
Update
In a statement to the House of Commons, Minister Sir Stephen Timms confirmed that the government will be removing some tax reliefs from the Motability Scheme starting July 2026. The changes include:
- VAT to be applied to Advance Payments (the upfront cost of the lease)
- Insurance Premium Tax to be applied to Motability leases
As a result, Motability estimates that the average Advance Payment will rise by around £400 for a typical three-year lease. However, vehicles already under lease at the time the new rules come into effect will not be impacted.
Restrictions
Alongside these financial changes, the government also announced restrictions on the types of vehicles that can be accessed through the scheme. Luxury car brands such as BMW and Mercedes will be banned from Motability listings starting in July 2026.
The goal, according to ministers, is to ensure better value for taxpayers and to prevent abuse of the system by people with “questionable conditions,” as described by some MPs.
Criticism
The changes have sparked sharp political debate. Labour MP Shaun Davies raised concerns about how these reforms could affect vulnerable claimants. He emphasised that Motability is vital for many disabled people, helping them get to work, attend medical appointments, and live independently.
In response, Sir Stephen Timms said: “The scheme will still offer a wide range of vehicles available with no upfront payment, funded solely by the mobility component of PIP (Personal Independence Payment).” He added that wheelchair-adapted vehicles will remain unaffected.
Eligibility
Much of the controversy revolves around who qualifies for a Motability car. Secretary of State Helen Whately criticised what she called the “widening” of access, pointing to cases of people claiming for conditions such as ADHD, acne, or tennis elbow. She argued that the scheme should return to its original focus on people with severe disabilities.
However, Liberal Democrat MP John Milne pushed back, noting that only around 200,000 people are eligible for a Motability vehicle at all, and that most of them have physical disabilities. He called recent claims made by politicians “some of the least accurate ever made.”
Sir Stephen acknowledged the point, saying that any future changes to eligibility will be considered carefully as part of the wider PIP review.
Impact
Despite the political noise, the scheme will continue to support disabled individuals, with around 40 to 50 vehicles still available without upfront payments. These options are expected to remain accessible through the mobility portion of benefits alone.
Here’s a summary of what’s changing:
| Change | Impact |
|---|---|
| VAT on Advance Payments | Estimated £400 increase in upfront cost |
| Insurance Premium Tax on leases | Higher overall lease cost from July 2026 |
| Ban on premium/luxury brands | BMW, Mercedes no longer eligible via scheme |
| Eligibility review under PIP reform | Tighter access expected for mental health claims |
| Existing leases and wheelchair vehicles | No changes; remain fully supported |
Next Steps
Motability has stated that it will begin contacting customers in spring 2026 to explain the new leasing terms. All proposed changes will undergo a disability impact assessment by the Motability Foundation before implementation.
They added that as the Scheme evolves, the Foundation will review how its grant programmes can support those most in need, especially those impacted by the cost increases.
Support
In the meantime, DWP has reiterated its commitment to helping disabled people access work and live independently. The Motability Scheme, along with other support like the Access to Work programme, plays a key role in closing the disability employment gap, which has remained stuck at around 30% for over a decade.
Further reforms to Access to Work are expected to be announced in the coming year as part of ongoing disability benefit reform efforts.
FAQs
When will Motability changes take effect?
From July 2026, tax changes and restrictions will apply.
How much will Advance Payments increase?
Average upfront cost will rise by around £400.
Will current leases be affected?
No, existing leases will not see changes.
Are luxury cars being banned?
Yes, brands like BMW and Mercedes will be excluded.
Will disabled people still get support?
Yes, affordable options and grants will remain available.
