DWP confirms new Motability Scheme changes in that could make huge saving | Personal Finance | Finance
The measures, which took effect on July 1, introduce new tax rules affecting some Motability leases. Under the changes, VAT will now be charged on advance payments made by customers who choose a more expensive vehicle, while Insurance Premium Tax will also apply to new leases. The DWP said that the reforms will not affect eligibility for the scheme and said disabled people will continue to receive their full enhanced mobility benefit, currently £77.05 per week, with many vehicles still available that require no advance payment.
The changes were first announced in last year’s Autumn Budget and form part of a wider package of welfare reforms that the Government says will save nearly £2 billion in total by the end of the decade.
Work and Pensions Secretary Pat McFadden said the changes “are driven by the fairness that underpins this Government – fairness for the taxpayer, fairness for disabled people, and fairness for the country.”
He continued: “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 latest reforms follow the Government’s decision, announced after the Budget, to remove luxury vehicles, including BMW and Mercedes models, from the Motability Scheme.
Ministers said the move was designed to return the scheme to its original purpose of providing practical transport rather than subsidising premium models.
Despite the tax changes, the DWP said the core Motability package remains unchanged. Eligible customers will continue to have access to a car, scooter or powered wheelchair, along with insurance for up to three named drivers, servicing, maintenance and breakdown cover.
The department also confirmed there will be no changes to existing Motability leases, no changes to eligibility for PIP or the Motability Scheme, and that the reforms do not apply to Wheelchair Accessible Vehicles.
For customers who may struggle to afford an advance payment or vehicle adaptations, the Motability Foundation will continue to provide means-tested grants.
The Motability changes form part of the Government’s broader welfare reform programme, which also includes increased face-to-face health assessments, expanded employment support for disabled people, a new Right to Try Work Guarantee and measures aimed at reducing fraud and error across the benefits system.
