Motability Scheme Changes
Important Changes Coming to the Motability Scheme from 1 July 2026
Many people may not yet be aware that significant changes are being introduced to the UK Motability Scheme for all new applications and vehicle orders placed on or after 1 July 2026.
These changes follow government tax updates and revisions to the Scheme's operating costs. While existing customers will remain on their current terms until the end of their lease, anyone ordering a new vehicle from 1 July onwards could be affected by several important changes.
VAT Added to Advance Payments
One of the biggest changes is that most Advance Payments will now be subject to VAT. For many vehicles that require an upfront payment, this means the amount customers need to contribute could increase significantly.
Previously, Advance Payments on Motability vehicles benefited from VAT relief. From 1 July 2026, VAT will generally be added to these payments, potentially increasing costs by 20% depending on the vehicle chosen.
Mileage Allowance Reduced
The standard mileage allowance for a three-year lease is being reduced from 60,000 miles to 30,000 miles.
This means customers will effectively have an allowance of around 10,000 miles per year, compared with the previous 20,000 miles per year average.
For Wheelchair Accessible Vehicles (WAVs), the allowance will reduce from 100,000 miles over five years to 50,000 miles over five years.
Many disabled people, particularly those living in rural areas, travelling regularly to hospital appointments, or relying heavily on their vehicle for independence, have expressed concerns about how these lower mileage limits may affect them.
Higher Excess Mileage Charges
Customers who exceed their mileage allowance will also face substantially higher charges.
The excess mileage rate will increase to 25p per mile (including VAT), which could result in significant additional costs for those who regularly exceed their allowance.
New Tyre Limits
Another notable change is the introduction of limits on tyre replacements.
Under the new rules:
- Standard three-year leases will be limited to six replacement tyres.
- Up to four of those replacements can be due to accidental damage.
- Five-year WAV leases will be limited to ten replacement tyres.
- Up to six of those can be due to accidental damage.
Previously, tyre replacements were generally provided as required throughout the lease period.
Insurance and Travel Changes
Insurance arrangements are also changing, with Insurance Premium Tax (IPT) applying to most new leases from July 2026.
In addition, customers wishing to take their vehicle abroad will need to obtain a VE103 certificate, which will now incur a charge of £22.
Existing Customers Are Not Affected Immediately
It is important to note that these changes only apply to new orders placed on or after 1 July 2026.
Anyone already on the Motability Scheme will continue under their existing lease terms until they renew or order a replacement vehicle.