Motability Scheme sets out how it will evolve

BUDGET 2025: Premium vehicles removed from scheme as it refocuses mission

Chancellor Rachel Reeves plans to reform the Motability Scheme which provides people with disabilities with subsidised lease cars.

The Motability Scheme allows people with disabilities to lease cars using state funding in order to curb taxpayer subsidies.

The scheme lets those who are eligible for a publicly funded allowance towards improving their mobility to use this funding towards leasing a vehicle, providing tax breaks on the leasing and insurance costs. Motability has more than 850,000 customers.

The scheme has attracted criticism because it had in some cases been used to pay for leases on luxury vehicles. Earlier this seek Motability removed premium brands removed from the scheme.

“The Motability Scheme was set up to protect the most vulnerable, not to subsidise the lease on a Mercedes Benz so I am making reforms that will reduce generous taxpayer subsidies,” told Parliament.

In response to the Budget, Motability said it will continue its core purpose of delivering vital mobility solutions for disabled people across the UK and maintaining stability for the future.

The Motability Foundation and the Motability Scheme will both continue to support for wheelchair accessible vehicles and adaptations and will maintain a range of vehicles available with no upfront payment.

The scheme says it has been impacted by external influences in recent years such as rising costs, fluctuating second hand car pricing and the large-scale introduction of EVs. 

The government has confirmed that VAT will apply to Advance Payments and Insurance Premium Tax will apply to scheme leases which will take effect from July 2026. Motability said the tax changes will mean the scheme will become more expensive for disabled people, but will remain sustainable with a choice of affordable vehicles.

Motability anticipates the average Advance Payment (upfront cost) of a vehicle, will increase by around £400 over the three-year package. It will continue to provide a range of around 40 to 50 vehicles available to lease with no upfront payment.

To minimise price increases for customers taking out a new lease, the scheme is considering a range of other changes across the leasing package including mileage, overseas breakdown cover, increased use of telematics for insurance purposes and other services.

Detail will be confirmed when the impact to disabled people has been fully assessed. 

Changes to the scheme’s package are expected to be introduced from July 2026. 

Motability Operations, which runs the scheme, will begin engaging with customers about the proposed changes in spring 2026. Proposed changes to the leasing package will undergo disability impact assessment by the Motability Foundation, which oversees the Scheme, before any changes are approved, announced and implemented.

Premium brand vehicles have been removed from the scheme, which will focus on vehicles that meet disabled peoples’ needs and represent value and purpose. Motability says it wants to harness competition between manufacturers to get good value.

The foundation will also consider how its grant programmes best support those most in need.

To combat the issue of misuse, the Motability Scheme is creating a new Special Investigations Unit. While the overall rate of misuse has remained stable, and the vast majority of customers use their vehicles in the way they are intended, the growth in customer numbers means more cases are being investigated.

There are now around 80 people who are dedicated to tackling misuse of Scheme vehicles who join the newly formed Unit. Motability Operations also plans to strengthen data-sharing arrangements with government and police agencies to enable quicker, more effective action where misuse is identified. 

A commitment to disabled people

The Motability Scheme said commits to:

• No changes for customers in current leases. Changes to the Scheme would relate to new leases.
• Continuing to provide a range of around 40 to 50 vehicles available to lease with no Advance Payment.
• Motability Foundation and Motability Operations will continue to subsidise and provide grant funding for the ongoing provision of Wheelchair Accessible Vehicles, while also funding adaptations to support over 82,000 customers with essential mobility solutions.
• Motability Foundation will continue to provide grants to support people with the most profound needs to access the scheme, having awarded £59.3m in 2024/25 to help over 10,000 customers benefit from essential mobility solutions.

Nigel Fletcher, chief executive of the Motability Foundation, said: “We understand the challenges disabled people face in accessing reliable and accessible transport, and how important a Motability car is to scheme customers. The changes to tax reliefs imposed on the scheme in today’s Budget statement mean the scheme will need to evolve. We are working hard to minimise price increases for customers and are taking steps to assess the impact of potential changes to the leasing package. Our focus remains firmly on protecting the Scheme for those who need it most.”

Andrew Miller, chief executive of Motability Operations, said: “An evolved Motability Scheme will continue to put the disabled people we serve at the heart of everything we do. Changes to evolve the Scheme will involve understanding what matters most to disabled people, working closely with Motability Foundation.”