Motability customers will face much more than £400 extra costs on average, thanks to Reeves’ tax rises

Tax changes announced by Labour chancellor Rachel Reeves last November will cost disabled people who lease a Motability* car more than £400 each on average, the company that runs the scheme has told Disability News Service (DNS).

Reeves announced last November that she was imposing VAT at 20 per cent on most advance payments for cars leased through the Motability scheme and removing the current 12 per cent insurance premium tax exemption.

Only vehicles with substantial adaptations for wheelchair- and stretcher-users were exempt from the new taxes, which were introduced this month on new Motability leases.

The taxes – described as “punitive”, “dismaying” and “unacceptable” by disabled people’s organisations last November – are expected to bring the Treasury revenue of £355 million a year by 2030-31.

Motability was also pressured by the government into removing all “premium” brands” – such as BMW, Jaguar and Mercedes – from the scheme.

But it is not yet clear exactly how much of a financial hit disabled people will themselves take as a result of the taxes.

Motability Operations, the company which runs the scheme, has said it will absorb some of the extra costs itself.

It has estimated that the tax changes would have added an average of £1,100 per new Motability lease if it had not introduced changes to the scheme, such as lower mileage allowances – cut from 20,000 to 10,000 miles a year – increasing excess mileage charges from 5p per mile to 25p**, tightening its tyre replacement policy, and imposing a fee to take vehicles abroad.

Motability Operations told DNS this week that the impact of last November’s tax changes will see customers pay an extra £400 on average through increases to advance payments for like-for-like vehicles.

But the company admitted that it could not yet say how much extra disabled customers will pay on average through the increased excess mileage charges, and the other changes.

These further costs mean disabled customers will face significantly more – on average – than £400 across the course of a three-year lease, as 27 per cent of them currently travel more than 10,000 miles a year in their Motability vehicle.

The mileage changes will particularly hit those living in rural areas, while many disabled people use their vehicle to get to and from work, take their children to school, reach vital and regular health appointments, or engage with the community.

Motability Operations also said that the number of models available through the scheme had fallen from 143 to 122 since last October, while the number of vehicles with no advance payment had dropped from 41 to 32, and the number available with an advance payment below £500 had fallen from 97 to 73.

It is still not clear what changes will be introduced to Scotland’s equivalent to the Motability scheme as a result of the tax changes.

*Motability Foundation, the charity that oversees the Motability scheme, is a Disability News Service subscriber

**21p for those who do not pay VAT on additional payments, such as those with a wheelchair-accessible vehicle