Plans to revamp the Motability scheme are set to press ahead this summer, despite mounting concern from campaigners who warn the reforms could make it increasingly difficult for disabled people to maintain their mobility.

More than 53,000 people have signed an online petition urging the UK Government to abandon the changes, arguing they are “unfair to the most vulnerable in society” and could seriously undermine people’s independence. The Department for Work and Pensions (DWP) has responded to the petition, confirming the planned changes will go ahead on July 1. However, should the petition reach 100,000 signatures, it would be considered by the Petitions Committee for debate in Parliament.

Petition creator Dave Walton has raised concerns over new costs linked to vehicle payments and stricter mileage limits, cautioning that many disabled people already depend on the scheme for their day-to-day journeys.

He further warned that rising costs could leave some struggling to afford a vehicle, particularly those on lower incomes, while those living in rural areas may have no viable alternative means of transport.

It is important to note that changes to the Motability Scheme will only apply to new leases, meaning existing customers will not be affected until they come to renew their agreements, reports the Daily Record.

Changes include:

• Some additional payments linked to Motability vehicles will face new taxes
• Insurance-related costs will rise for certain leases
• Standard mileage allowances are being reduced for new customers

The DWP response on the Petitions Parliament website, said: “The Motability Scheme is a lifeline for many disabled people and families, supporting their independence by enabling them to lease a car, a wheelchair accessible vehicle, scooter or powered wheelchair in exchange for an eligible disability benefit allowance.

“The Government and Motability have worked in partnership to develop a suite of reforms which strikes the right balance between delivering a key service for disabled people and fairness to the taxpayer, saving over £1 billion by financial year 2030/31. These reforms will not affect eligibility for the Motability Scheme or disability benefits.

“The VAT relief for Advanced Payments – a one-off payment made to lease more expensive vehicles – will be removed and Insurance Premium Tax (IPT) will apply to leases at the standard rate, bringing tax treatment in line with commercial leasing firms.

“These changes will only apply to customers taking out new leases with Motability and will not apply to current leases or to wheelchair accessible vehicles in recognition of the additional costs associated with these vehicles. VAT reliefs on weekly lease costs and vehicle resale will remain in place.”

The reforms are intended to align the scheme more closely with the broader vehicle leasing market and guarantee its long-term financial viability. Motability has additionally confirmed it will continue to provide a wide range of vehicles available without an Advance Payment, ensuring that people can access vehicles suited to their requirements, whether that’s a larger vehicle or extra boot space to accommodate wheelchairs, using solely their disability benefit.

You can read the DWP response in full here.

What is changing?

The proposed changes relate to qualifying schemes, the only current example of which is the Motability scheme, which leases vehicles with preferential tax treatment to disabled people in receipt of eligible welfare benefits.

Reasons for change

Guidance on GOV.UK states: “The policy objective for the measure is to promote fairness and value for money for taxpayers. VAT changes restrict tax reliefs for more expensive vehicles provided under qualifying schemes, while IPT changes bring the tax treatment of qualifying schemes in line with other commercial lease providers.”

Who is likely to be affected

From July 1, 2026 onwards, qualifying schemes which lease vehicles to eligible disabled people will be impacted, the only current example of which is the Motability scheme, as well as businesses which provide insurance to qualifying schemes.

VAT

Eligible benefits paid to claimants by the DWP, the Ministry of Defence, or the Department for Communities (Northern Ireland) can be used to meet the cost of leases. This portion of the payment will be disregarded when calculating the supply value for VAT purposes, meaning no VAT will be levied against it. However, the measure will abolish the VAT zero-rate on top-up payments — made in addition to the transfer of eligible welfare benefits — for those who pay extra to lease higher-value vehicles.

This top-up payment will be liable for the standard rate of VAT (20%).

These changes will have no bearing on the existing zero rate for vehicles designed or substantially and permanently adapted for wheelchair or stretcher users. Top-up payments for such vehicles will therefore continue to be zero-rated.

Insurance Premium Tax

The guidance states: “This measure restricts the Insurance Premium Tax (IPT) exemption for insurance on vehicles leased through qualifying motor vehicle leasing schemes.

“Once changes take effect, the exemption will apply only to insurance contracts relating to vehicles that are substantially and permanently adapted for wheelchair or stretcher users, or originally designed for their use, where leased through a qualifying scheme.

“All other vehicles provided through such schemes will be subject to IPT at the standard rate of 12 per cent. The liability of insurance relating to all vehicles provided through leases entered into prior to 1 July 2026 will remain exempt.”