Overview
- From July 2026, VAT will be applied to advance payments and Insurance Premium Tax to Motability leases, according to DWP statements to Parliament.
- Motability expects the typical advance payment to rise by about £400 over a three-year package, though some vehicles will still require no upfront payment.
- Premium marques such as BMW and Mercedes will be removed from the scheme as the government seeks better value for taxpayers.
- Existing leases and vehicles designed or adapted for wheelchair or stretcher users will remain exempt from the new charges.
- Motability will consult customers in spring 2026 and the Motability Foundation will carry out disability impact assessments and maintain means-tested grants, while the DWP reviews PIP mobility eligibility alongside Conservative proposals to restrict access for some mental health conditions.