Motability shake-up: New taxes, mileage caps and premium brand bans to hit disabled drivers
Thu, 02 Apr 2026
Disabled drivers are facing the biggest shake-up to the Motability Scheme in its history, with new government taxes and strict usage limits set to increase costs for thousands of customers.
Following changes announced in the Autumn Budget, Motability has confirmed that from 1 July 2026, new leases will no longer be exempt from standard tax rates. The move is expected to add an average of £400 to the upfront Advance Payment of a typical three-year lease.
The end of tax-free leasing
For the first time, VAT at 20% will be applied to Advance Payments, excess mileage charges and early termination fees. Additionally, a 12% Insurance Premium Tax (IPT) will be added to insurance contracts within the lease.
While the portion of the disability benefit used for monthly payments remains tax-free, any top-up payments made by the customer will now be hit by the new charges. Wheelchair Accessible Vehicles (WAVs) and those with "significant adaptations" will remain exempt from these tax increases.
New mileage and maintenance caps
In a move to control rising costs, Motability is also introducing strict new limits on how vehicles can be used.
Mileage limits: New three-year car leases will be capped at 30,000 miles (10,000 per year). While Motability says the average user covers 7500 miles, those in rural areas or with frequent medical appointments may struggle.
Excess charges: The penalty for going over your mileage limit is rising fivefold, from 5p to 25p per mile. A driver exceeding their limit by 5000 miles could face a £1250 bill at the end of the lease.
Tyre restrictions: Replacements will now be limited to six tyres over a three-year lease, with only four of those allowed for accidental damage.
Travel abroad: Customers will now have to pay an administration fee to the RAC for a VE103 form to take their vehicle into the EU.
Premium brands shown the door
The variety of cars available has already begun to shrink. Motability has officially removed "premium" brands to refocus on affordable, practical transport.
Brands no longer accepting new applications include Audi, BMW, Mercedes-Benz, Lexus, and Alfa Romeo. All coupes and convertibles have also been axed from the price list.
To fill the gap, several new manufacturers have joined the scheme for 2026, including Omoda, BYD, GWM Ora and Chery, offering a wider range of electric SUVs.
What if I already have a car?
The good news for current drivers is that nothing changes immediately. If you are already in a lease, or if you place an order before 1 July 2026, you will remain on your current terms and won't be affected by the new taxes or mileage caps. Motability has also promised to keep roughly 40 to 50 vehicles on the list with £0 Advance Payment to ensure the scheme remains accessible.
Andrew Miller, CEO of Motability Operations, said the changes were "essential" to keep the scheme sustainable in the face of rising insurance and repair costs.
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