Ministers at the DWP and Treasury have provided updates on the Motability scheme amid growing concerns about forthcoming changes. Government officials addressed a range of questions on Monday as parliamentarians pressed for clarity on VAT relief, PIP and related matters.

The vehicle leasing programme is intended to assist individuals with disabilities or illnesses who face mobility challenges. It is accessible to those receiving specific disability benefits who make contributions towards a vehicle through the programme – with vehicles required to be returned if benefit entitlement ceases.

According to March figures, approximately 860,000 customers were enrolled in the Motability scheme across the UK. The government has been pursuing cost-cutting measures as part of efforts to strengthen the nation’s financial position.

On 26 November, Rachel Reeves unveiled modifications to the Motability scheme during the Budget announcement. The Chancellor committed to excluding luxury vehicles from the programme and promised to deliver £1.5 billion in taxpayer savings across five years.

She stated at the time: “The Motability scheme was set up to protect the most vulnerable, not to subsidise the lease on a Mercedes Benz, and so, I am making reforms that will reduce generous taxpayer subsidies.”, reports the Mirror.

“And Motability have confirmed that they will remove luxury vehicles from their scheme, getting the scheme back to its original purpose of offering cost-effective leases to disabled people.”

On Monday, December 15, ministers addressed several queries about Motability. Dan Tomlinson, Exchequer Secretary to the Treasury, responded to a question from Neil O’Brien, Tory MP for Harborough, Oadby and Wigston.

Mr O’Brien asked “the Chancellor of the Exchequer what estimate she has made of the cost of VAT relief for Motability in (a) 2025 and (b) each year of the Budget forecast.”

Mr Tomlinson provided a response and also detailed changes set to be implemented in 2026. He stated: “HMRC publishes estimates of the costs of tax reliefs in its annual publication: Nonstructural tax reliefs – GOV.UK. The VAT relief ‘Vehicles and other supplies to disabled people (vehicles only)’ includes the cost of VAT reliefs for supplies of vehicles to disabled people, including but not limited to Motability. The next release of this publication will be on 22 January 2026 and will include an estimate for 2024-25 and a forecast for 2025-26.

“At Budget 2025 the government announced tax changes to the Motability scheme which will save over £1 billion over the next five years. The VAT relief for top-up payments made to lease more expensive vehicles will be removed for new leases from 1 July 2026, and Insurance Premium Tax will apply at the standard rate to insurance contracts on the Scheme from 1 July 2026.

“The tax changes will not apply to vehicles designed, or substantially and permanently adapted, for wheelchair or stretcher users. These tax changes ensure Motability can continue to deliver for its customers, for example through the continued provision of a broad range of vehicle models available without any top-up payments.”

The ‘potential impact’ of changes to Motability

Motability Operations reports that over 80% of customers claim the scheme enhances their access to health services. Furthermore, more than 21% of Motability users report improved job opportunities, enabling them to secure or maintain employment.

The forthcoming alterations have sparked queries regarding the potential effects on scheme users. Ruth Jones MP, Labour representative for Newport West and Islwyn, queried the Secretary of State for Work and Pensions about “what assessment he has made of the potential impact of the proposed changes to the Motability scheme on the lived experience of users”.

In response, Sir Stephen Timms stated: “The package of reforms to the Motability Scheme announced as part of the Budget will ensure the Scheme delivers fairness for the taxpayer, while continuing to support disabled people. The Scheme will continue to offer a choice of affordable vehicles to meet a range of accessibility needs and offer vehicles which require no advance payment, meaning that people will be able to access a suitable vehicle using only their qualifying disability benefit. Insurance Premium Tax (IPT) will apply to leases at the standard rate, bringing tax treatment in line with commercial leasing firms.

“Existing leases and vehicles substantially designed for, or adapted for, wheelchair or stretcher users will continue to benefit from VAT reliefs on advance payments and the IPT exemption, in recognition of the additional costs associated with these vehicles. Motability Foundation, the independent charity with responsibility for overseeing the Scheme, will continue to offer means-tested grants to support eligible people who would otherwise struggle to afford the advance payment.”

‘Transport barriers’ for disabled people

She also queried when Sir Stephen plans to meet representatives of the Motability Collective Campaign Group. He responded: “Ministers regularly meet representative groups of a range of types and every request to meet a minister is given consideration.”

Siân Berry MP, who represents Brighton Pavilion for the Green Party, queried the DWP in the Commons on Monday about the department’s assessment of “has made of the potential impact of the Motability Scheme on transport barriers experienced by disabled people.”

In response, Sir Stephen Timms stated: “The Motability Scheme supports many disabled people and families, by enabling them to lease a car, wheelchair accessible vehicle, scooter or powered wheelchair in exchange for an eligible disability benefit allowance. The scheme helps people with significant mobility issues participate in society, including by breaking down barriers to work.”

He further added: “The Motability Foundation have published its strategy to support and empower disabled people by improving their access to transport. The plan sets out how they will act directly and work with others to drive change.”

Motability and Personal Independence Payments

Helen Whately, Shadow Secretary of State for Work and Pensions, raised another question related to Motability on Monday, specifically concerning Personal Independence Payments.

She sought details on “how many Personal Independence Payment claimants are in a contract with the Motability Scheme to receive a vehicle by primary medical condition.”

To this, Sir Stephen Timms responded succinctly: “The information requested will be published in due course.”

Eligibility for the Motability scheme

Citizens Advice has stated that you can obtain a Motability vehicle – specifically, a car, wheelchair accessible vehicle, scooter or powered wheelchair – if you’ve been awarded:

• the higher rate of the mobility component of Disability Living Allowance (DLA)

• the enhanced rate of the mobility component of Personal Independence Payment (PIP)

• Armed Forces Independence Payment (AFIP) or War Pensioners’ Mobility Supplement

• the enhanced rate of the mobility component of Adult Disability Payment

• the higher rate mobility component of Scottish Adult Disability Living Allowance

• the higher rate of the mobility component of Child Disability Payment

However, it’s important to note that when you apply, you must have at least a year remaining before your benefit concludes. Furthermore, you cannot apply for a Motability vehicle if you are receiving DLA and the DWP has issued you a letter instructing you to apply for PIP.

For further details on eligibility, visit the Motability Scheme website.