Major changes to the Motability scheme that push up costs for disabled drivers will go ahead from July 2026, the Government has confirmed.
Motorists are set to pay an extra £400 for their lease after Rachel Reeves launched a tax crackdown on Motability Operations – the company running the scheme.
Luxury car models such as BMWs and Audis will be stopped immediately, following pressure on the Government to offer only mainstream brands.
The disability minister, Sir Stephen Timms, confirmed to MPs this week that some tax reliefs on the scheme, which provides cars to personal independence payment (PIP) claimants would be ditched in July.
The changes will “improve value for money for taxpayers” while still ensuring the scheme can “provide outstanding support for disabled people”, he told the Commons.
Tax changes to push up costs
Motability Operations has said the advance payment for a three-year lease will have to increase by an average of £400 after the Chancellor imposes VAT and the insurance premium tax for the first time in July.
People who receive PIP hand over most or all of the £300 mobility element of the benefit each month in order to lease a car.
Many vehicles also require an advance payment – ranging from a few hundred pounds to several thousand for the most expensive cars.
Some motorists have told The i Paper that they may struggle to afford the extra £400, calling it “an attack on PIP claimants”.
Charities have warned that some people may have to drop out of the scheme and lose their ability to get to work or medical appointments independently.
They have also pointed out that they may struggle to go for one of the very cheapest cars – which come with no upfront payment – because they need the higher-spec vehicles which have adaptions suited to their disability.
Luxury car brands halted
Luxury car models such as BMWs and Audis will be stopped immediately following pressure from the Government.
Reeves used her Budget speech last month to argue that the scheme was not set up to “subsidise the lease on a Mercedes Benz”.
However, some Motability scheme users driving luxury brands have told The i Paper that the most expensive, premium cars are the most adaptable and have the best safety features.
Those driving luxury models will not have to hand them back – but they will not be on offer to new customers, or available again to existing customers at the end of their current lease.
Motability Operations said over 845 cars with different sizes and features will still be available. It said staff will help customers find the right vehicle for their needs, including adaptations.
Scheme benefits in doubt
Motability Operations has said it would try to “minimise price increases for customers” when it comes to upfront payments following the tax changes.
But it means the company is considering cutting back on a range of benefits in its leasing package to reduce price rises – including overseas breakdown cover.
There could also be “increased use of telematics for insurance purposes”. Telematics is the tech used to monitor vehicles remotely. Using it to encourage safer driving could help cut insurance costs.
Crackdown on misuse
There will be a crackdown on drivers abusing the scheme, with a new “special investigations unit” set up.
Unauthorised use of the cars by friends or family members is one form of the exploitation that has seen people stripped of vehicles. Other forms of misuse have seen cars used to run a taxi or to make food deliveries.
Motability Operations said the overall rise in customer numbers – around 860,000 people use the car scheme – means more cases are being investigated.
The company has been using tracking devices to help identify those exploiting the system. “There are now around 80 people who are dedicated to tackling misuse of scheme vehicles who join the newly formed unit,” it said.
Possible PIP changes ahead
The disability minister has raised the possibility of changes that restrict PIP eligibility – but not until after a review that he is leading.
The Government was forced to ditch a cost-cutting PIP overhaul in the summer. But disabled claimants said they still fear cuts could be made when the Timms review finishes in autumn 2026.
“My review will look at the eligibility criteria for the mobility component of PIP,” Timms told MPs in the Commons this week.
The Conservatives and Reform UK want to stop people with mental health issues like depression and anxiety, and those with ADHD, being eligible for the PIP mobility payment, and therefore Motability.
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Helen Whately, the shadow Work and Pensions Secretary, this week challenged Timms in the Commons to restrict the PIP system to those with only “severe disabilities”.
The minister responded by saying the Tories “had 11 years to change it if they thought doing so was necessary, but they did absolutely nothing”.
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