Motability users in the UK have been warned of an upcoming cost increase following an official update from the Department for Work and Pensions (DWP). From July 2026, key tax changes will take effect that are expected to raise the Advance Payment on Motability vehicles by around £400 over a standard three-year lease.
The DWP and Motability Operations have now confirmed that VAT will apply to Advance Payments and Insurance Premium Tax (IPT) will be charged on leases—two changes that have triggered concern among MPs and disability advocates.
Change
The Motability Scheme helps disabled people lease a car using their mobility benefits. It’s a vital service—currently accounting for one in five new cars sold in the UK.
But starting in July 2026, the scheme will undergo its biggest cost change in years, driven by the Autumn Budget’s tax updates. While Motability has said it will still offer 40–50 vehicles with zero Advance Payment, the average upfront cost is expected to go up by £400.
This could impact affordability for users with tighter budgets or those who rely heavily on this benefit to maintain their independence.
Criteria
To lease a car through Motability, individuals must be receiving one of the following benefits with at least 12 months remaining:
- Enhanced Rate of the Mobility Component of PIP (Personal Independence Payment)
- Higher Rate Mobility Component of DLA (Disability Living Allowance)
- Armed Forces Independence Payment (AFIP)
- War Pensioners’ Mobility Supplement (WPMS)
The scheme allows eligible individuals to use part or all of their mobility benefit to cover the cost of leasing a new vehicle—without needing a deposit in most cases.
Statement
Motability released a clear statement following the tax announcement:
“The tax changes will increase the cost of a lease on the Scheme and we anticipate the average Advance Payment (upfront cost) of a vehicle will increase by around £400 over the three-year package.”
Still, the organisation emphasised its commitment to offering a range of cars with no Advance Payment, aiming to ensure continued access for those who rely on the service the most.
The changes are expected to begin in July 2026, with customer engagement starting in spring 2026. Before anything is implemented, the Motability Foundation will carry out a disability impact assessment to understand how the updates might affect disabled users.
Concerns
Labour MP Neil Duncan-Jordan has pressed the government for clarity on how the change will impact end-users—especially those with fluctuating conditions like MS.
He asked whether lease costs would increase significantly and whether a full impact assessment had been conducted before the policy was put forward.
In response, Sir Stephen Timms, Minister of State at the DWP, gave reassurance that despite the cost changes:
“There will still be cars available through the scheme which require no advance payment. This means that customers will still be able to lease a car just with their qualifying disability benefit.”
He added that exact pricing changes would depend on vehicle make and model, and would be set by Motability, not the DWP.
Impact
While the increase of £400 is spread over three years, it still raises concerns among advocacy groups about affordability, especially as users already face increased living costs due to inflation and the cost-of-living crisis.
Motability says it will continue offering grants through its charitable Motability Foundation, which may help cover costs for the most vulnerable. These grants are expected to become more important after the tax changes take effect.
Future
Motability Operations has committed to reviewing its leasing package and engaging directly with customers before anything is finalised. The Foundation will also evaluate how its grant programmes can best support users who might be most affected by the added charges.
Until then, no action is required from existing scheme users. But from spring 2026, users can expect communication about the upcoming changes, new pricing, and potential support options.
FAQs
When will Motability costs increase?
New costs take effect from July 2026, due to tax changes.
How much will Advance Payments rise?
Around £400 over a typical three-year lease.
Will cars still be available with no payment?
Yes, 40–50 vehicles will have no Advance Payment.
Who qualifies for the Motability Scheme?
Those receiving PIP, DLA, AFIP, or WPMS with 12+ months left.
Can I still use only my benefit to get a car?
Yes, some cars will be available using only your benefit.
