Ministers are hoping to claw back around £1 billion by 2030 through an overhaul of a scheme designed to help disabled people access vehicles. The Motability scheme came under fire last year after it emerged that luxury marques such as BMWs and Mercedes were reportedly available through it.
Chancellor Rachel Reeves stripped them from Motability at the Budget, and further measures outlined in the autumn are now being brought into effect. Motability customers who make optional one-off advance payments for larger and more costly vehicles will now be required to pay VAT, while all new leases will be subject to insurance premium tax.
Work and Pensions Secretary Pat McFadden 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.”
The shake-up comes as ministers press ahead with efforts to reform the welfare system, cut costs and return more people currently claiming sickness benefits to employment.
Andrew Miller, chief executive at Motability Operations, the company that runs the Motability scheme, said: “Tax changes announced in the UK Government’s Autumn Budget have significantly increased the cost of running the Motability scheme.
“While we have had to make difficult decisions in response, the changes we are making mean the scheme can keep disabled people connected to freedom and independence now and in the future.
“The scheme continues to offer value for disabled people, including cars with no advance payment in addition to their weekly payments.”