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Motability tax relief removed

Wibbles

Not only has DWP removed "luxury" cars from Motability but also……..

In the November Budget, Chancellor Rachel Reeves announced that from July 2026, VAT will be applicable to Advance Payments, and Insurance Premium Tax will apply to Scheme leases. The Motability company, which manages the vast scheme accounting for one in five cars sold in the UK, has estimated that the average Advance Payment, or upfront cost, of a vehicle will rise by approximately £400 over the three-year package.

The insurance premium tax will be substituted with a standard rate of 12% applied to insurance policies for most new vehicle leases under this scheme. The DWP has stated that cars 'significantly adapted for wheelchair users' will not be affected by the tax alteration.

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Comments

Trevor_PIP

@Wibbles in addition, they are to reduce the mileage limit, so you can't drive your Motability car as far. Because of this, returned cars will be worth more money! Motability are to use this extra cash to try and reduce costs placed on disabled people due to VAT and insurance tax. Though it may take a little time to sort this out.

Trevor_PIP

I put "have" by mistake in my reply above, I have edited that out. In addition:-

As part of the recent government announcements, there will be a reduction in the current 20,000 yearly mileage limit for Motability cars, although the exact new limit has not yet been specified. I have read 15,000 miles, which is the upper limit of a private lease.

These changes are part of a broader review of the Motability Scheme, which aims to ensure sustainability and affordability while addressing concerns about the scheme's impact on taxpayers.

Wibbles

What exactly is IPT Insurance Premium Tax and how does it affect Motability customers ?

I thought that Insurance was provided by Motability rather than paid by customers and so would not be liable to any tax ?

OverlyAnxious

I don't think many Motability cars even do 10,000 miles a year, let alone 20,000? So this change won't affect many users and the vast majority of the cars won't be worth any more when returned either.

The ones who do more than 15,000 (if that is set as the new limit) will almost certainly be working and commuting, and will be able to afford the small additional charge for extra mileage.

Trevor_PIP

https://forum.scope.org.uk/discussion/comment/1092859#Comment_1092859

You have misread my post. "As part of the recent government announcements" That statement is not saying the government is reducing the mileage... Reducing the mileage limit is a viable way to reduce the increased costs on the disabled and it is being looked into. I have read it is being reduced to 15000 miles to tie in with a private lease.

"Addressing concerns about the scheme's impact on taxpayers" is a current issue and government has made statements about taxpayers which includes other political parties. If you think taxpayers don't have issues you are mistaken unfortunately. It is not my interpretation, that post is taken from an official statement off the internet!

The rest of your reply is known by interested people.

Reducing the mileage limit is a viable way to reduce the extra costs on the disabled as the returned cars will be worth more. I can't see any other way that can do it. It was Motability that came up with the idea for cost reduction.

Trevor_PIP

https://forum.scope.org.uk/discussion/comment/1092896#Comment_1092896

I like your response. Yes, the mileage reduction is not definite, but could be a viable way to reduce the extra costs on the disabled. Thanks for the replies.

NeuroEve

They have also introduced a fair usage policy on replacement tyres. Had an email to say they are only allowing 8 tyres over 3 years any more you will be liable for cost. This is from January 2026.

Wibbles

https://forum.scope.org.uk/discussion/comment/1092984#Comment_1092984

Does that include punctures as well ?

NeuroEve

New, or replacement tyres is my understanding. Dont think repairs would count. I will try and find the new terms and conditions they sent when I get home.

Wibbles

https://forum.scope.org.uk/discussion/comment/1093244#Comment_1093244

They WOULD say that - much more profit in a new tyre than a puncture repair !

Wibbles

I checked and

"The Motability Scheme itself doesn't specifically ban repairs, but if the vehicle is part of the scheme, the tyres should be checked by an approved Motability dealer or a qualified repair centre to ensure they meet the safety and performance standards."