From 1 July 2026, tax changes announced by the UK Government will affect new leases on the Motability Scheme.
We’ve put together this helpful guide to explain what’s changed and what this means for you.
Key takeaways:
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Most new Motability Scheme leases will include standard rate VAT on some lease payments from 1 July 2026
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New car Advance Payments will be shown with standard rate VAT (20%)
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New Wheelchair Accessible Vehicle (WAV) Advance Payments will be shown with 0% VAT.
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WAVs qualify for 0% VAT if you provide a Customer Eligibility Declaration confirming the leased vehicle will be used by someone who is usually a wheelchair or stretcher user
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Whether these tax changes apply to you depends on whether you qualify for VAT relief
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Most customers will not pay VAT on the lease payments made through your qualifying mobility allowance
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You may need to pay VAT on other payments linked to your lease, including any Advance Payment, excess mileage charges and early termination fees
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If your disability means you need an adaptation fitted to your vehicle, the cost of the adaptation may qualify for VAT relief
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From 1 July 2026, most new Motability Scheme leases will include VAT and Insurance Premium Tax (IPT).
These changes follow a decision by the UK Government to change the tax rules for the Motability Scheme.
If you already have a lease before 1 July 2026, this will not impact you until it is time to get your next vehicle.
VAT is a tax that’s added to many goods and services in the UK.
The standard rate of VAT is currently 20%. From 1 July 2026:
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Prices for new cars on the Scheme will include standard rate VAT
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Prices for new WAVs on the Scheme will be shown at 0% VAT
VAT may apply to some other payments you make as part of a new Motability Scheme lease.
Most customers will not pay VAT on the lease payments made through your qualifying mobility allowance.
However, you may need to pay VAT on other payments linked to your lease, including:
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Any Advance Payment, if the vehicle you choose has one
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Excess mileage charges
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Early termination fees
Your dealer will explain what applies to you before you order your vehicle. Your confirmed price will be shown in your pre-contract agreement.
Whether VAT relief applies depends on your individual circumstances and whether you meet the eligibility criteria.
You do not need to pay this VAT if the vehicle has been permanently and substantially adapted for someone who normally uses a wheelchair*, or who needs to travel on a stretcher.
*A person may be considered as normally using a wheelchair for the purpose of this declaration if they are a lower limb amputee or a disabled person with a degenerative condition, such as multiple sclerosis, who uses a wheelchair only when their condition requires it.
This person could be you or someone who uses the vehicle, such as:
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an additional driver
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someone in your household
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a family member
If your vehicle has been significantly adapted, you’ll need to complete a Customer Eligibility Declaration (CED) when you order your vehicle to make sure the right VAT is applied to your lease payments.
This will include:
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Most WAVs
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Cars with significant adaptations that help you travel safely and independently
The prices shown on our price list for new WAVs include 0% VAT. This is because most WAV customers will be eligible for VAT relief. Whether this applies to you will depend on whether you meet the eligibility criteria.
Your dealer will explain whether you qualify for VAT relief.
If your disability means you need an adaptation fitted to your vehicle, the adaptation may qualify for VAT relief.
You do not need to pay VAT on the cost of adaptations if they’re needed because of a person’s disability.
This person could be you. Or it could be someone who uses the vehicle regularly, like:
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an additional driver
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someone in your household
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a family member
It’s important to remember that this VAT relief only applies to the adaptation itself. Your dealer will explain whether VAT relief also applies to your vehicle when you order it.
Why are VAT and IPT being added to the Motability Scheme?
The UK Government has introduced tax changes that affect the Motability Scheme.
From 1 July 2026, VAT and IPT will apply to most new Motability Scheme leases.
Will all leases on the Scheme include VAT?
Most new leases will include VAT from 1 July 2026. However, some leases may be eligible for VAT relief.
Whether VAT applies to you depends on whether you qualify for VAT relief.
Your confirmed price will be shown in your pre-contract agreement.
Do WAV customers qualify for VAT relief?
Many customers who lease a WAV qualify for VAT relief because the vehicle has been permanently and substantially adapted for someone who normally uses a wheelchair or needs to travel on a stretcher.
Whether you qualify depends on your individual circumstances. Your dealer will explain whether you may be eligible for any VAT relief and what this means for the price you pay.
Will this affect my existing lease?
No. The tax changes to an Advance Payment will only apply to new orders starting on or after 1 July 2026.
However, if you ordered before 1 July and collect your car on or after this date, you might need to pay VAT on some payments, such as excess mileage or early termination fees.
What about Powered Wheelchair and Scooter leases?
There are no changes to Powered Wheelchair and Scooter leases. VAT will not be charged on any payments.
Stay up to date on Motability Scheme changes
We understand these changes may raise questions. We’re here to help you understand what they mean for you and support you when it’s time to get your next vehicle.
To read more about the Scheme changes, visit our dedicated Scheme changes page.
Featured image credit: Live and Learn / Shutterstock
