A major change to the Department for Work and Pensions (DWP) Motability Scheme has come into effect today (Wednesday, July 1), and the Government says it will help save taxpayers a fortune by the end of the decade.
The Motability Scheme allows disabled people to exchange their mobility allowances to lease an accessible vehicle. And while it’s been popular due to the additional costs many Brits can avoid through it, concerns have been raised about it’s affordability as the public purse strings strain under the burden of benefits spending – prompting ministers to re-examine the rules. The first change that has now come into effect relates to advance payments, an extra fee people must pay when choosing a more expensive vehicle on the Motability Scheme. Previously, these payments had been exempted from Value Added Tax (VAT).
But from today, advance payments are subject to VAT at the standard rate (20%) adding hundreds of millions of pounds additional tax revenue for the Treasury.
Leases under the Motability Scheme had also previously not been subject to Insurance Premium Tax (IPT). That ends today too, with all new leases now subject to the 12% levy.
The Government said the scheme was “set up to help disabled people stay mobile and independent, and these changes ensure it continues to do exactly that, while delivering genuine value for taxpayers”, as reported by Manchester Evening News.
“Disabled people on enhanced mobility benefits will continue to receive their full award of £77.05 per week and remain eligible for the scheme, with vehicles still available that require no advance payment, meaning people can access a car using their benefit alone,” it added.
The DWP said the changes set to save taxpayers £1billion by 2030, while protecting disabled people’s access to cars, scooters and powered wheelchairs, the DWP has said.
It comes after luxury vehicles such as BMW and Mercedes were removed from the scheme at the last budget.
The changes today were announced in the Chancellor Rachel Reeves‘ Autumn Budget and are “part of a wider package of welfare reforms set to save nearly £2 billion by the end of the decade”, the DWP said.
Work and Pensions Secretary Pat McFadden MP said: “Today’s changes are driven by the fairness that underpins this Government – fairness for the taxpayer, fairness for disabled people, and fairness for the country.
“We’re saving £1 billion of taxpayer money by removing VAT relief from some new Motability leases, whilst ensuring the scheme still supports disabled people’s mobility and independence.
“We’re building a fair welfare system and an economy that works for everyone.”