Motability Scheme Changes Coming Into Effect From 1 July 2026

The Motability Scheme is introducing a series of changes from 1 July 2026, affecting VAT on Advance Payments, mileage allowances, excess mileage charges, tyre replacements and breakdown cover. The updates will apply depending on both the date a vehicle application is submitted and the handover date, meaning customers with existing orders may experience different terms depending on when they receive their new vehicle.

One of the biggest changes is the introduction of standard-rate VAT on Advance Payments (APs) for vehicles handed over on or after 1 July 2026, unless the AP price has been locked in under the scheme's existing conditions. VAT will also be applied to several in-life costs, including excess mileage charges, early termination fees and damage or recharge fees where applicable. At the same time, the standard mileage allowance for new agreements will reduce from 20,000 miles per year (60,000 over three years) to 10,000 miles per year (30,000 over three years) for applications submitted on or after 1 July 2026, while excess mileage charges increase to 25p per mile including VAT.

Customers should also be aware that the number of tyre replacements included during a three-year lease will reduce from eight to six, and EU breakdown cover will no longer be included as standard, instead becoming available for an additional administration fee on eligible agreements. Existing customers with applications submitted before the changes may retain current benefits depending on their handover date, making it worthwhile to check how the updated rules could affect any upcoming Motability order.

Thinking about ordering a new Motability vehicle? Speak to the team at Paul Rigby for the latest guidance on how these changes may impact your application and to ensure you understand the terms that will apply to your new vehicle.