Labour refuses to call off Motability tax reforms in July as drivers abuse scheme to buy luxury cars

Hemma Visavadia
Tue, 14 Apr 2026 10:39:21 +0000

Labour has shut down calls to remove key tax burdens on Motability users following a landmark petition, which highlighted the impact of the decision.

The Department for Work and Pensions has responded to a growing petition with more than 30,000 signatures to call off its planned tax hikes in July.

The petition followed new rules announced by Rachel Reeves at the Autumn Budget, which saw Motability users lose key tax benefits for the first time.

Under the new structure, from July 1, users of the car scheme will have to pay Insurance Premium Tax and VAT on newly leased vehicles.

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The measures will see drivers incur a price increase of £1,100 and come after reports of abuse of the system saw motorists use the scheme to purchase luxury vehicles heavily discounted.

The Chancellor said in the Budget: "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.

"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."

The petition stated that the upcoming changes will be unfair to the most vulnerable in society and could affect their independence.

Despite receiving thousands of signatures, the Government has refused to amend the rule changes coming in this summer.

Responding to the petition, a spokesperson said: "The Motability Scheme is a lifeline for many disabled people and families, supporting their independence by enabling them to lease a car, a wheelchair accessible vehicle, scooter or powered wheelchair in exchange for an eligible disability benefit allowance.

"The Government and Motability have worked in partnership to develop a suite of reforms which strike the right balance between delivering a key service for disabled people and fairness to the taxpayer, saving over £1billion by financial year 2030/31."

The spokesperson noted that the reforms will not affect eligibility for the Motability Scheme or disability benefits.

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The spokesperson detailed how the new changes will apply to leases at the standard rate, bringing tax treatment in line with commercial leasing firms.

"These changes will only apply to customers taking out new leases with Motability and will not apply to current leases or to wheelchair accessible vehicles in recognition of the additional costs associated with these vehicles," the Government added.

However, Motability has also confirmed it will continue to offer a broad range of vehicles available without an Advance Payment, ensuring that people can access vehicles suited to their needs.

In March, Motability announced changes to the leasing package that will affect new leases taken out from July 1. As part of the update, for new leases, mileage will be 10,000 miles a year.

This would move to being consistent with standard mileage allowances for car leases, with the organisation noting that three out of four current customers drive fewer than 10,000 miles a year.

Meanwhile, standard leases will continue to include insurance, servicing, maintenance and breakdown cover, protecting the core package of support available to customers.

The Government added: "In determining these changes, Motability have taken careful steps to ensure the Scheme remains good value and accessible for disabled people.

"This includes engaging with Scheme customers about prospective changes, the feedback from which has informed the changes."