Labour tax changes to add over £400 to Motability scheme costs for disabled drivers

Disabled people who lease cars through the Motability scheme will face an average cost increase of more than £400 as a result of tax changes announced last November by Labour Chancellor Rachel Reeves, according to Disability News Service (DNS).

The scheme operator told DNS that Reeves' policies will impose a 20% VAT charge on most advance payments for Motability vehicles and scrap the existing 12% exemption on insurance premium tax.

The warning signals a significant financial hit for disabled individuals who rely on the Motability program to lease adapted vehicles using their mobility allowance. The company running the scheme provided the estimate directly to DNS, highlighting the scale of the added burden.

Reeves' November 2024 budget measures were initially framed as part of broader fiscal consolidation, but the Motability operator's calculation reveals a specific and substantial cost passed on to some of the most vulnerable car users. DNS reported that the average extra cost per customer will exceed £400, combining the VAT and insurance tax changes.