Changes in the budget mean the average amount paid is rising, says Motability, and MPs have raised questions
The Department for Work and Pensions has given an update on the potential cost increases for Motability users due to changes in the Budget. Officials confirmed this week that VAT will apply to Advance Payments and Insurance Premium Tax will apply to Scheme leases which will take effect from July 2026.
The Motability company which administers the huge scheme that accounts for one in five cars sold in the UK, has estimated that the average Advance Payment, or upfront cost, of a vehicle, will increase by around £400 over the three-year package. Concerned MPs have written to ministers questioning the impact this would have on some of the users of the scheme.
To qualify for a Motability car, the person must receive a higher-rate mobility allowance, such as the Enhanced PIP Mobility Component, Higher Rate DLA Mobility, Armed Forces Independence Payment (AFIP), or War Pensioners’ Mobility Supplement (WPMS), and have at least 12 months of their award remaining.
Speaking about the changes in the November budget Motability has said: “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. We will continue to provide a range of around 40 to 50 vehicles available to lease with no upfront payment.
“Changes to the Scheme’s package are expected to be introduced from July 2026. Motability Operations, which runs the Scheme, will begin engaging with customers about the proposed changes in spring 2026. Proposed changes to the leasing package will undergo disability impact assessment by the Motability Foundation, which oversees the Scheme, before any changes are approved, announced and implemented. As the Scheme evolves and we fully understand the impacts changes may have on disabled people, the Foundation will also need to consider how its grant programmes best support those most in need.”
Labour MP Neil Duncan-Jordan raised a question about the changes, asking Secretary of State for Work and Pensions Pat McFadden: “Whether any new vehicle leases on the Motability Scheme will not increase in cost for the end user from July 2026.”
In answer Sir Stephen Timms ,Minister of State (Department for Work and Pensions)., saidf people would still be able to get a car unsing only their benefit – without paying cash out on top: “We are protecting the taxpayer through changes to the Motability scheme, ensuring it supports disabled people whilst delivering efficient use of taxpayers’ money.
“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.”
Mr Duncan-Jordan also asked: “How much new leases for Motability vehicles will increase in end user cost from July 2026 as a result of the Autumn Budget 2026.” Sir Stehen replied: “We are protecting the taxpayer through changes to the Motability scheme, ensuring it supports disabled people whilst delivering efficient use of taxpayers’ money.
“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. Any change in costs of advance payments will depend on a range of factors, including the make and model of the car, and be determined by Motability.”
Mr Duncan-Jordan also asked: “Whether he made an assessment of the potential impact of those policy changes on people with fluctuating conditions like MS before the policy was announced.” Sir Stephen said: “Before any announcements were made, Motability Operations confirmed it will continue to offer a broad range of vehicles without an Advance Payment, ensuring that people who elect to join the Scheme can access vehicles suited to their needs, whatever their health condition or disability, in exchange for all or part of their mobility allowance.”