DWP tax changes to Motability will cost users £400 each

The Department for Work and Pensions (DWP) has announced tax changes that could cost disabled Motability users £400 each. Of course, this will prevent many people from accessing the scheme.

In turn, this will stop disabled people from accessing work, healthcare, and other responsibilities.

Terrible of @UKLabour to impose these charges on sick vulnerable disabled struggling people! @DisRightsUK @MotabilityOps https://t.co/OVK3anvUBB

— Gary JJ Hedley (@gary_hedley1) March 27, 2026

Motability is introducing reduced mileage allowances, new charges for taking vehicles abroad, and increases in advance payment amounts of up to £400. It is making these changes to offset an additional £300m in taxes introduced in last year’s autumn budget.

DWP and Motability

As the Canary previously reported, the DWP takes the mobility component of PIP as the lease payment on cars from Motability for three years at a time.

This means that if you get a car, you will receive less in benefits. You can only qualify for the scheme if you score over 12 points on the mobility section of the PIP assessment. This quickly debunks the “getting a free car for acne/ depression/ ADHD” bullshit that the likes of the right-wing press and Reform UK would love you to believe. While they might be among the listed conditions, they are rarely the primary one.

The Motability Foundation buys new cars and then leases them out to people who need them. It then sells them once users return them. It’s a circular economy, and it’s a vital part of the British car industry.

A fifth of the UK’s car trade comes from Motability, meaning the industry would collapse without it. So, disabled people are apparently both drains on the economy and also upholding it.

Tax changes

From July 1, 2026, VAT and Insurance Premium Tax will apply to most new car leases. This means it will cost more to deliver the Motability Scheme.

The Motability company, which administers the scheme, estimates that the scheme will cost the average customer around £400. This increase applies to the upfront Advanced Payment for their three-year vehicle package.

It will specifically impact anyone whose current lease agreement expires after July 1, 2026. The changes will apply when they come to renew their vehicle lease.

The DWP’s own assessment suggests that the changes will force some users to leave the scheme entirely.

The assessment also highlights that those who choose to pay more upfront for a higher-value lease will be the most significantly impacted. These customers may have to pay more for the same vehicle or opt for a smaller, lower-specification model.

The Motability Scheme will still provide a choice of vehicles that require no Advance Payment. Of course, this could cause problems for people who need larger vehicles, for example, to transport a wheelchair.

Additionally, many ‘basic’ cars can’t be adapted in the ways disabled people often need.

Cumulative effect

This also comes at a time when disabled people are facing ever-increasing cuts and pressure, meaning we have to consider the wider, cumulative effect.

the timing matters here. this comes after multiple rounds of benefit cuts and cost pressures on disabled people. the cumulative effect is larger than any single policy change suggests.

— Israel Ifeoluwa (@FinWithIsrael) March 27, 2026

More than 17,000 people have signed an online petition which urges the UK Government to scrap the proposed changes to tax on advanced payments, along with the reduction in the mileage allowance.

These tax changes are nothing short of ableism in action. They will hugely impact disabled and chronically ill people’s independence, all in the name of appeasing the right-wing.

The only way Starmer stands a chance against the likes of Reform is by pouncing on the ‘hating disabled people’ bandwagon. But by stripping disabled people of even more freedoms so they can save a few quid, Labour is showing us exactly why they don’t deserve to be anywhere near power.

Featured image via Inclusive Driving/ YouTube