The Department for Work and Pensions plans to protect four groups of people on Personal Independence Payment & Disability Living Allowance from a Motability Scheme crackdown. The Motability Scheme is going through several changes from the Labour Party government starting this summer.
The changes aim to make the Motability Scheme tougher for claimants because of the growing welfare bill. There will be changes to tax & mileage and tyres. The changes will only affect new claimants. A 20 per cent VAT will be applied to the upfront cost of the vehicle.
A 12 per cent Insurance Premium Tax will be added to the insurance portion of the lease. Current leases will not change until the lease ends. If you place an order before July 1 2026 you will lock in the current price and terms even if the car is delivered after that date.
Wheelchair Accessible Vehicles remain exempt from the new VAT and IPT tax charges to protect those with the highest needs. These changes currently apply to the UK-wide scheme.
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The Scottish Government is still reviewing how this affects the AVES scheme in Scotland. From April 2026 all first-time customers must have a Drive Smart tracker fitted regardless of age. Previously this was mostly for drivers under 25. The scheme was hit with £300million of new taxes following last year’s budget.
The scheme allows people receiving the higher or enhanced rate of the mobility component of disability benefits to direct some or all of their payments to lease a new car or accessible vehicle. Around 890000 people use the scheme. Many of them receive either PIP or Disability Living Allowance.
