Motability change concern update as DWP gives PIP eligibility statement

There have been calls for an impact assessment before any proposed cuts are made to the Motability scheme, which allows disabled people to lease a car or powered wheelchair

Amid concerns about significant changes to the UK’s Motability scheme, an update has been provided. There are growing fears that Chancellor Rachel Reeves may target the Motability scheme in her November Budget, a move that has sparked criticism due to its potential cost implications.

Reports suggest that VAT could be imposed on all new cars, potentially adding around £3,000 to the price of even the most affordable vehicles, according to Motability. The Motability Scheme was established to address the ‘market failure’ in providing suitable transport for disabled individuals – from limited access to cars to the high costs of adapted vehicles and insurance.

The Motability scheme allows eligible individuals to exchange their qualifying mobility allowance for a new car, powered wheelchair, or scooter on a three-year lease, with payments automatically deducted. There are also worries that the eligibility criteria may be altered.

In the UK, it is estimated that the scheme cost taxpayers £2.8 billion last year, with one in five new cars registered through the scheme. Data also revealed an 80 per cent increase in enhanced rate personal independence payment ( PIP ) mobility claims, largely driven by mental health-related claims.

During Work and Pensions questions in the House of Commons yesterday, Labour MP Emma Lewell raised the matter, reports the Liverpool Echo.

She asked: “The Motability scheme provides a lifeline to people with disabilities, allowing them to get to health appointments, study, maintain employment and so much more.

“Cuts to the scheme risk increased health needs and increased unemployment, which are likely to cost much more than any short-term savings. Does my right hon. Friends agree that before any proposed cuts are implemented, it is vital to carry out a proper impact assessment?”.

Minister of State ( Department for Work and Pensions ) Sir Stephen Timms assured Ms Lewell that there would be no alterations to eligibility criteria: “I can assure my hon. Friend that there will be no changes to the eligibility conditions for the mobility component of the personal independence payment, or indeed other aspects of PIP, until the conclusion of the review, which I will be leading and co-producing with disabled people. That is expected to report in autumn next year.”

Statistics indicate that potential proposals to impose VAT on individuals purchasing vehicles through the Motability scheme could add £3,000 in upfront expenses for disabled people.

Motability warned that implementing VAT for Motability vehicles ‘would raise costs sharply and exclude many from the freedom and independence the scheme provides’. A spokesperson for the Motability Scheme said: “The Motability Scheme exists to enable freedom and independence for disabled people. Every pound of VAT relief is passed directly to disabled customers, many on low incomes, to make mobility affordable. Introducing VAT on leases would make cars unaffordable for most disabled people, leaving only the wealthiest able to access the Scheme – a result that would fundamentally undermine its purpose.”

Analysis by Motability revealed that if VAT was imposed on the scheme, there are various ways it could be funded.

“Based on the average price of a Scheme lease (for a petrol and diesel vehicle as of April 2025), costs to disabled people could range from £3,000 to £6,500. The enhanced mobility Personal Independence Payments (PIP) allowance is worth just over £4,000 a year.”

The organisation stated that the median household income of a disabled person using the Scheme is approximately £18,500 – roughly half the UK average (£36,700).

It continued: “This would immediately make the Scheme unaffordable for most disabled people, leaving only those on higher incomes able to participate.

“Research also shows that a majority of disabled people using the Scheme will not replace the car purchase from an alternative route. A removal of the VAT zero-rating will therefore make it much harder for disabled people to access affordable mobility and any assumption that significant VAT revenue will be generated is misplaced.

“The Scheme operates at scale, allowing bulk purchasing and strong manufacturer discounts. Removing the zero-rating would erode this efficiency and undermine the social purpose of enabling independence and affordable mobility. There would also be a knock-on impact to jobs in the automotive sector.”

Graham Footer, chief executive of Disabled Motoring UK (DMUK), told DNS: “DMUK is concerned by the recent reports in the national media that the chancellor is considering making changes to the Motability scheme, including removing the tax breaks.

“The fact this is even on the table for consideration is a worry. If the chancellor goes ahead with the changes, it will have a significant detrimental impact on Motability customers and for many it will put the scheme financially out of reach.”

The government has said it will not comment on speculation about what might be contained in the budget. Watch the debate here.