2026 Motability Scheme Changes Explained

From 1 July 2026, new Motability Scheme leases will be affected by several changes: Advance Payments will have 20% VAT added, standard vehicle insurance included in the lease will become subject to Insurance Premium Tax, the mileage allowance for standard cars is being reduced, tyre replacements are being capped for the first time, and BMW and Mercedes-Benz have been removed from the scheme entirely. None of this affects existing leases — only new orders placed from that date onward.

Here's what each change actually means.

VAT on Advance Payments

Advance Payments — the one-off upfront cost some vehicles require if they cost more than your benefit allowance covers — are currently VAT-free. From July 2026, 20% VAT will be added to new Advance Payments. This doesn't affect cars that don't require an Advance Payment in the first place, and it won't change anything for leases already in place.

Insurance Premium Tax on standard vehicle insurance

Motability Scheme leases include insurance as standard, and that insurance is currently exempt from Insurance Premium Tax (IPT). From July 2026, standard vehicle insurance will be subject to IPT at 12%. Wheelchair accessible vehicles (WAVs) remain exempt from this change. This is a tax change at government level, not a decision by the Motability Scheme or Howards, and the Motability Scheme has said it intends to absorb as much of the additional cost as possible rather than passing it all on.

Close-up of a car dashboard with speedometer and tachometer.

Reduced mileage allowances

Currently, standard car leases allow up to 60,000 miles over a three-year term, and WAV leases allow up to 100,000 miles over five years — an average of 20,000 miles a year. For orders placed on or after 1 July 2026, this is being reduced to an average of 10,000 miles a year: 30,000 miles over three years for standard cars, or 50,000 miles over five years for WAVs. The charge for exceeding your mileage allowance is also increasing, from 5p to 25p per mile over the limit. If your mileage needs are higher than this, it's worth discussing options with your dealer before ordering.

New limits on tyre replacement

Tyres remain included in every Motability Scheme lease, but for new orders placed on or after 1 July 2026, replacements will be capped rather than unlimited. Standard three-year car leases will allow up to six tyre replacements in total, with a maximum of four of those for accidental damage. Five-year WAV leases will allow up to ten replacements, with a maximum of six for accidental damage. The Motability Scheme has said most customers replace two or fewer tyres over a typical three-year lease, so this is expected to affect a small minority of higher-mileage drivers rather than the average customer.

Mechanic aligning tyre on a mounting machine

Woman packing car boot with girl holding inflatable ring.

A new charge for taking your car abroad

From 1 July 2026, taking a new-order Motability Scheme vehicle into the EU will require a VE103 form from the RAC, along with an administration fee — previously this wasn't charged. Fewer than 1% of customers used breakdown cover abroad last year, so this is a smaller change but worth knowing if you regularly drive in Europe.

BMW and Mercedes-Benz leaving the scheme

As part of a wider refocus toward practical, affordable mobility, BMW and Mercedes-Benz have been removed from the Motability Scheme. If you were considering one of these brands, it's worth discussing alternative options — Howards represents several brands that remain firmly part of the scheme, including Vauxhall, Peugeot, Citroën, Toyota, Nissan, Suzuki, Kia, Hyundai, Honda and Fiat.

What this means if you're ordering soon

If you're planning to order a new Motability Scheme vehicle, the timing of your order relative to 1 July 2026 could affect your Advance Payment and mileage allowance. It's worth speaking to a Motability Scheme specialist at Howards to understand exactly how these changes apply to the specific vehicle you're considering.

What this means if you already have a lease

If your lease is already in place, these changes don't apply to you until you come to renew at the end of your current term. There's no need to take any action now.

Frequently asked questions

Do these changes affect my current Motability Scheme lease?

No — these changes only apply to new leases ordered on or after 1 July 2026. Existing leases continue under their original terms until renewal.

Why is VAT being added to Advance Payments?

This follows a change in government tax policy, not a decision made by the Motability Scheme or Howards. The Motability Scheme has said it will try to absorb as much of the additional cost as possible.

Can I still get a BMW through the Motability Scheme?

No — BMW, along with Mercedes-Benz, has been removed from the scheme. Several other brands Howards represents remain available, including Toyota, Honda, Kia, Hyundai, Vauxhall, Peugeot, Citroën, Suzuki, Nissan and Fiat.

Will my mileage allowance definitely be reduced?

Only for new orders placed on or after 1 July 2026 — if your order was placed before that date, your original mileage allowance and 5p-per-mile excess charge stand for the full term. New orders get a 10,000-mile-a-year allowance and a 25p-per-mile excess charge.

Is there a limit on tyre replacements now?

For new orders from 1 July 2026, yes — up to six tyres over a three-year car lease (four for accidental damage) or up to ten over a five-year WAV lease (six for accidental damage). Existing leases aren't affected, and the Motability Scheme says most customers replace two or fewer tyres over a typical lease anyway.

Motability Scheme Changes from July 2026: What You Need to Know