More than 800,000 disabled drivers and passengers across the UK could see notable changes to their vehicle costs from 2026, as new rules affecting the Motability Scheme come into force. Announced during the Autumn Budget 2025, the reforms aim to improve long-term sustainability of the scheme amid rising operational pressures.
While existing leases will remain protected, new applicants and renewing customers from 1 July 2026 will face additional charges and reduced vehicle options. Here’s a detailed breakdown of what is changing, how it may impact drivers, and what steps you can take now.
Motability Scheme Overview: How It Supports Disabled UK Drivers
Established in 1977, the Motability Scheme allows eligible benefit recipients to exchange their mobility allowance for a leased vehicle. The scheme covers:
- Insurance
- Servicing and maintenance
- Breakdown cover
- Road tax
Qualifying benefits include:
- Personal Independence Payment (PIP) – Enhanced Mobility Rate
- Disability Living Allowance (DLA) – Higher Rate Mobility
- Armed Forces Independence Payment (AFIP)
- War Pensioners’ Mobility Supplement
Recipients currently receive £75.75 per week (PIP enhanced mobility rate), which is used to fund the lease. The scheme operates a fleet of more than 800,000 vehicles, including wheelchair-accessible vehicles (WAVs).
For many families, the scheme provides essential mobility for employment, education, healthcare appointments, and everyday independence—particularly in rural areas with limited public transport.
Key Motability Scheme Rule Changes From July 2026
The most significant financial adjustments begin on 1 July 2026. Here’s what drivers need to understand:
1. VAT Introduced on Advance Payments
Currently, advance payments are VAT-free. From July 2026, 20% VAT will apply to advance payments on new and renewed leases.
Example impact:
- A £5,000 advance payment could increase to £6,000 after VAT.
- A £2,000 payment may rise to £2,400.
This change will mainly affect customers choosing higher-spec vehicles or SUVs.
2. Insurance Premium Tax (IPT) Applied
An additional 12% Insurance Premium Tax will be applied to standard vehicles. Wheelchair-accessible vehicles will remain exempt.
This may add approximately £100–£220 per year to lease costs depending on vehicle type.
3. Premium Brands Removed
From December 2025, several premium manufacturers are no longer available for new applications, including:
- BMW
- Mercedes-Benz
- Audi
- Jaguar
- Land Rover
- Porsche
- Tesla
Additionally, coupés and convertibles have been removed from eligibility lists.
Specs Box: Motability Scheme 2026 Key Details
| Change Effective Date | 1 July 2026 |
| VAT on Advance Payments | 20% |
| Insurance Premium Tax | 12% (WAVs exempt) |
| Existing Leases | Fully Protected Until Renewal |
| Weekly Mobility Allowance (PIP) | £75.75 |
| Lease Duration | 3 Years (Standard) |
Estimated Cost Comparison: Before vs After July 2026
| Vehicle Model | Current Advance | Estimated Post-VAT | Annual IPT Estimate |
|---|---|---|---|
| Kia Sportage ‘3’ Auto | £499 | £599 | £120 |
| Ford Puma Titanium | £1,999 | £2,399 | £150 |
| Volkswagen Tiguan SEL | £4,999 | £5,999 | £200 |
| Skoda Kodiaq SE L | £6,250 | £7,500 | £220 |
Note: Final figures may vary depending on updated price lists and vehicle specifications.
Who Will Be Most Affected?
The changes may particularly impact:
- Low-income households relying solely on mobility allowance
- Families needing larger SUVs for accessibility
- Rural drivers with limited public transport options
- Standard vehicle users (around 70% of leases)
Wheelchair-accessible vehicle users are partially shielded due to IPT exemptions.
What Remains Unchanged?
Importantly, eligibility rules remain the same. There are:
- No changes to qualifying benefit criteria
- No changes to lease mileage allowance (60,000 miles over 3 years)
- No impact on current active leases
- No change to adaptation funding support
Motability Foundation grants are expected to continue supporting customers facing financial hardship.
Vehicle Options in 2026: Shift Toward Practical Models
With premium brands removed, the scheme now focuses on family SUVs, hybrids, and electric vehicles. Popular choices include:
- Kia Sportage
- Ford Puma
- Hyundai Tucson
- MG ZS EV
- Vauxhall Grandland
Electric vehicles now represent nearly 20% of the fleet, supported by public charging incentives and growing infrastructure.
Why These Changes Are Being Introduced
The government states the reforms are designed to ensure the long-term financial sustainability of the scheme. Rising vehicle costs, supply chain disruptions, electric vehicle transitions, and second-hand market volatility have placed additional financial strain on operations.
Officials argue that the adjustments refocus the scheme on essential mobility needs while maintaining core protections for vulnerable users.
What UK Drivers Should Do Now
If your lease renewal falls before July 2026, you may wish to review options early to secure current pricing structures. Drivers should:
- Check lease renewal dates
- Compare Q1 and Q2 2026 price lists
- Consult authorised Motability dealerships
- Explore available grants if affordability is a concern
Planning ahead can help minimise unexpected cost increases.
Frequently Asked Questions (FAQs)
When do VAT and IPT changes begin?
From 1 July 2026 for new and renewing leases.
Are existing leases affected?
No. Current leases remain unchanged until renewal.
Does eligibility change in 2026?
No. Benefit qualification rules remain the same.
Are wheelchair-accessible vehicles affected?
WAVs are exempt from Insurance Premium Tax.
Final Thoughts
The Motability Scheme 2026 rule changes represent a financial adjustment rather than a structural overhaul. While upfront costs may increase for some drivers, the scheme continues to provide essential mobility support for hundreds of thousands of disabled people across the UK.
Careful planning and early renewal consideration may help mitigate the impact. As updates continue through 2026, staying informed will be key for drivers relying on this vital support system.
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