What Changes are Coming to the Motability Scheme in 2026?
What We Know
From 1 July 2026, a number of important updates will come into effect across the Motability Scheme, following changes to UK Government tax rules. These updates are being introduced in response to the application of VAT and Insurance Premium Tax (IPT) to parts of the Scheme, which has increased the overall cost of providing vehicles. To ensure the Scheme remains sustainable and continues to offer good value for customers, Motability has made a series of adjustments to pricing, allowances and what is included within the lease package.
It’s important to note that these changes will only apply to new vehicle orders placed on or after 1 July 2026. If you are already leasing a vehicle through the Motability Scheme, your current agreement will stay exactly the same until your lease comes to an end. You will only see the impact of these changes when you place your next order or renew your lease.
VAT & Insurance Premium Tax
The UK Government has introduced new taxes, meaning:
VAT will now apply to:
- Advance Payments
- Excess mileage charges
- Early termination fees
Insurance will now include Insurance Premium Tax (IPT)
Important to know:
- The core lease paid via mobility allowance remains VAT-free
- Some vehicles (e.g. wheelchair-accessible vehicles) may still qualify for tax relief
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Reduced Mileage Allowance
From 1 July 2026, the standard mileage allowance will be reduced to 10,000 miles per year, or 30,000 miles over a typical 3-year lease. For Wheelchair Accessible Vehicles (WAVs), the allowance will be set at 50,000 miles over a 5-year lease.
Higher Excess Mileage Charges
If you exceed your mileage allowance, the cost per additional mile will increase to 25p per mile, including VAT. This means it’s more important than ever to choose a mileage level that suits your driving needs.
Tyre Replacement Limits
While tyre replacement is still included as part of the Motability package, new limits will apply. The number of replacements allowed will depend on the length of your lease and general wear and tear.
New Charges for Taking Vehicles Abroad
If you plan to take your Motability vehicle outside of the UK, a small administration fee may now apply. Customers will also need to notify the breakdown provider in advance before travelling.
What’s NOT Changing on the Motability Scheme
The Scheme remains all-inclusive, including:
- Insurance
- Servicing & maintenance
- Breakdown cover
While these changes introduce some additional costs, the Motability Scheme continues to offer outstanding value, with an all-inclusive package designed to keep drivers mobile, independent, and supported.