Published 4 June 2026 · Last updated 22 June 2026
The Motability Scheme has confirmed that VAT will be applied to Advance Payments on leased vehicles from July 2026, following the UK Government’s decision to remove the longstanding VAT exemption. This change will affect thousands of disabled people who use the scheme to lease cars, powered wheelchairs, and mobility scooters using their disability benefits.
Advance Payments are one-off upfront costs that some scheme customers pay at the start of their lease when the vehicle they choose costs more than their weekly benefit allowance covers. For popular models, Advance Payments can range from a few hundred pounds to several thousand. Until now, these payments have been exempt from VAT. From July 2026, an additional 20% VAT charge will be applied, meaning a vehicle with a current Advance Payment of £1,500 could rise to £1,800, and higher-end adaptations could see increases of £1,000 or more.
According to Motability, the scheme is working to absorb as much of the impact as possible and has committed to reviewing its pricing structure. The charity has also stated it will increase the amount of financial support available to customers who face hardship as a result of the changes. However, disability campaigners have expressed concern that the additional costs will push certain vehicle options out of reach for those on fixed incomes.
The change is particularly significant in the context of the UK’s transition to electric vehicles. Many EVs currently carry higher Advance Payments than their petrol or diesel equivalents because of the higher purchase price of electric models. With the Government’s 2035 deadline for phasing out new petrol and diesel car sales, Motability customers will increasingly need to choose electric options. The added VAT on already-elevated Advance Payments could slow EV adoption among disabled drivers unless additional subsidies or pricing adjustments are introduced.
As noted by Oak Tree Mobility, the Motability Scheme is one of the largest fleet operators in the UK, leasing over 600,000 vehicles to disabled people and their families. The scheme is funded through the higher-rate mobility component of Personal Independence Payment (PIP), the War Pensioners’ Mobility Supplement, or the Enhanced Rate of the mobility component of Adult Disability Payment in Scotland. Customers assign their weekly mobility allowance directly to the scheme in exchange for a brand-new vehicle, insurance, breakdown cover, servicing, and tyre replacement.
For those who lease powered wheelchairs or scooters through the scheme, the impact may be more limited since many of these products are available at nil Advance Payment. However, specialist or higher-specification models that do require an Advance Payment will see the same 20% increase. Analysis from MotaClarity suggests that customers should check their renewal quotes carefully and consider whether alternative models with lower or zero Advance Payments might meet their needs.
Motability has urged customers not to rush into decisions before the July deadline, as early termination of an existing lease may incur charges. Those whose leases are due for renewal around July 2026 should contact the scheme directly to discuss their options and any transitional support that may be available.
Related guides on Review Mobility
- Mobility scooters: types and buying advice
- Wheelchairs: powered and manual options
- How much do wheelchairs cost?
- Find a mobility equipment company near you
Published 4 June 2026 · Last updated 22 June 2026