Welfare reforms saving taxpayer £1 billion come into force

Welfare reforms saving taxpayer £1 billion come into force
Reforms to the Motability scheme come into force today (1 July 2026), saving taxpayers £1 billion by 2030 while protecting disabled people's access to cars, scooters and powered wheelchairs.
- Reforms to the Motability scheme to ensure fairness for taxpayer, whilst still supporting disabled people’s mobility, come into force today.
- New tax rules on Motability car leases due to save taxpayers £1 billion by 2030.
- Follows removal of luxury vehicles - including BMW and Mercedes - from the scheme after the Budget.
VAT will now apply to advance payments - the optional one-off top-up paid by customers who choose a more expensive vehicle - and Insurance Premium Tax will apply to new leases.
Both changes were announced at the 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 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.
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.
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.
The reforms are part of a wider government drive to fix the broken welfare system it inherited, including:
- Introducing a Right to Try Work Guarantee to give everyone who can work the chance to do so.
- Investing £3.5 billion in tailored employment support for sick or disabled people.
- Increasing face-to-face assessments for health benefits
- Tackling fraud and error in the benefit system, saving £14.6 billion over this parliament
- Rebalancing Universal Credit to tackle the perverse incentives which push people away from work.
Today’s changes follow action taken immediately after the Budget to remove luxury vehicles - including BMW and Mercedes - from the scheme, returning Motability to its original purpose of giving disabled people access to a practical vehicles, and not subsidising premium extras that go beyond what most people in this country can afford.
Additional information
- These changes do not apply to Wheelchair Accessible Vehicles.
- The core Motability package remains in place: eligible disabled people continue to access a vehicle, scooter or powered wheelchair, with insurance for up to three drivers, UK breakdown cover and maintenance.
- There is no change to existing leases and no change to eligibility for PIP or the Motability scheme.
- The Motability Foundation continues to offer means-tested grants to support people who would otherwise struggle to afford an advance payment, adaptations or a wheelchair-accessible vehicle.