Motability Scheme Fees Rise Following Government Tax Increase

Disabled people who use the Motability scheme face higher costs after new taxes raised the programme’s bill by about £300 million. Motability Operations has announced a package of changes to reduce the impact on customers.

Overview of the changes

The operator will lower annual mileage allowances. It will also increase fees for going over those limits.

Other alterations include new charges for taking vehicles abroad and revised tyre replacement rules. Some customers could see larger upfront payments when they start new leases.

Key measures announced

• Reduced annual mileage allowances.
• Higher excess mileage charges.
• New fee for taking cars overseas.
• Changes to tyre replacement limits.
• Advance payments for new leases may rise by £300–£400 for leases beginning after July 1.
• Many new vehicles will still be available without an advance payment.

Why the changes are needed

The organisation says the tax changes make running the scheme much more expensive. It calculated that doing nothing would push the average new lease cost up by about £1,100.

The Government has moved to apply VAT to advance payments and insurance premium tax to leases from July 2026. These measures are the main drivers of the extra £300 million cost.

Context and eligibility

The scheme enables some disability benefit recipients to use part or all of their payments to lease a car or adapted vehicle. Eligibility is restricted to those entitled to the higher or enhanced rate of the mobility component.

Roughly 890,000 people currently use the programme.

Political scrutiny and responses

The scheme has faced intense political attention. Last autumn’s budget also banned certain luxury models from the programme, including some premium marques.

Reform UK has called for major reform to stop perceived abuse of the scheme. Motability’s chief executive, Andrew Miller, said the operator sought changes that reflect typical customer use.

What to expect next

Customers taking new leases after July 1 should expect higher advance payments on average. Filmogaz.com will monitor further announcements and policy developments.

Note: Motability scheme fees and the wider impact of the government tax increase remain evolving stories. Consumers should check official guidance before making decisions.