Motability scheme changes explained: What disabled drivers need to know from 1 July

Hundreds of thousands of disabled motorists will see changes to the Motability Scheme from 1 July, with some customers facing higher upfront costs, lower mileage allowances and new fees when taking out a vehicle lease.

Here's what is changing, who will be affected and what it could mean for your next Motability vehicle.

What is the Motability scheme?

The Motability Scheme helps disabled people lease a new car, Wheelchair Accessible Vehicle (WAV), scooter or powered wheelchair using the mobility component of certain disability benefits.

Those who qualify for the scheme can exchange some or all of their qualifying benefit payments for a vehicle lease that includes insurance, servicing, maintenance, breakdown cover and road tax.

Around 890,000 people currently use the scheme across the UK.

Benefits that can qualify someone for the scheme include the Enhanced Rate Mobility Component of Personal Independence Payment (PIP), the Higher Rate Mobility Component of Disability Living Allowance (DLA), Adult Disability Payment (ADP) and several other mobility-related benefits

Why is the Motability scheme changing?

The changes are off the back of reforms announced in the 2025 Budget.

Now from 1 July 2026, most Motability leases will become subject to VAT on advance payments and Insurance Premium Tax (IPT) on vehicle insurance.

The Government says the reforms are intended to improve fairness in the tax system and bring the scheme more in line with other vehicle leasing arrangements.

The chancellor Rachel Reeves also said in the budget the scheme will no longer use upmarket cars such as BMW and Mercedes-Benz.

Motability has said the new taxes will significantly increase the cost of running the scheme, forcing it to make changes to keep leases affordable and protect core benefits such as insurance, servicing, maintenance and breakdown cover.

Will Motability advance payments increase?

Some customers will now see higher advance payments when leasing a new vehicle.

An advance payment is the upfront amount paid on certain cars that cost more than the mobility allowance covers. From 1 July, VAT at 20% will apply to most of these payments.

Motability says it has taken steps to absorb some of the additional costs, meaning the average increase is expected to be around £400 rather than the full amount that would otherwise have been passed on to customers.

There will be some vehicles that continue to be available with no advance payment at all.

New Motability mileage limits

One of the biggest changes affects mileage allowances.

For new vehicle orders placed from 1 July:

• Three-year leases will include a total allowance of 30,000 miles.

• Wheelchair Accessible Vehicle (WAV) leases will include 50,000 miles over five years.

The change represents a reduction from the previous allowance of 60,000 miles over a standard three-year lease and 100,000 miles over a five-year WAV lease.

It means, the annual allowance for many customers will be cut from 20,000 miles a year to 10,000 miles a year.

Motability says the decision was based on customer driving habits, with the average scheme user covering around 7,500 miles a year.

The organisation argues that most customers will remain comfortably within the new limits while helping to keep costs under control.

However, drivers who regularly travel longer distances for work, medical appointments or caring responsibilities could be more affected by the changes.

Those who exceed their mileage allowance will face excess mileage charges of 25p per mile for most customers on new leases, although Motability says it plans to introduce an exceptions process for people with exceptional circumstances who need to drive more.

For customers nearing the end of their current lease, it's worth noting that the new mileage limits only apply to vehicles ordered from 1 July 2026 onwards.

Existing lease agreements will keep their current mileage allowances until they expire

Motability tyre replacement rules are changing

Motability is also tightening its tyre replacement policy for customers taking out new leases from 1 July.

Under the current rules, customers can have up to eight tyre replacements during a standard three-year lease as part of the scheme's fair usage policy.

However, for new leases:

• Up to six replacement tyres will be included during a three-year lease.

• Up to four of those can be because of damage.

• Five-year WAV leases will include up to 10 tyres, with up to six because of damage.

Motability says most customers currently replace two or fewer tyres during a typical three-year lease.

Will existing Motability customers be affected?

For most customers, existing leases will not change.

The new rules only apply to new vehicle orders placed on or after 1 July 2026. Anyone already leasing a vehicle through the scheme will keep their current terms until they renew their lease.

Motability has also said that customers who ordered a vehicle before 1 July will not see their agreed advance payment change, even if they collect the vehicle after the new tax rules take effect.

However, when you renew your lease some Motability customers will face higher costs, particularly those choosing vehicles with advance payments or those who regularly exceed mileage limits.