Certain road users may be set to face higher bills due to major rule changes this July.
800,000 could be impacted by July updates (Image: Getty)
Thousands of motorists could be slapped with a £400 increase to motoring bills after a major change came into force this month. More than 800,000 disabled people across the UK use the Motability Scheme, exchanging part or all of their mobility benefit for access to a vehicle.
However, from July 1, VAT has been applied to Advance Payments on many new Motability leases. Motorists will also have to pay Insurance Premium Tax on some models, increasing the cost to drivers.
Motability customers have been hit with new rules (Image: Getty)
Predictions have suggested that the changes could increase the average Advance Payment by around £400 over a three-year lease in a blow to cash-strapped road users.
Thomas Drury, money-saving expert at The Investors Centre said: “The bigger financial change is the new tax treatment being introduced on future leases.”
“From July 2026, VAT will apply to Advance Payments on vehicles that require an upfront contribution, while Insurance Premium Tax will be added to most new leases. Motability estimates this could increase the average Advance Payment by around £400 over a three-year agreement.”
Existing customers will not see their current agreements changed, but those close to renewal could feel the biggest impact. It is likely that the cost of their next vehicle will be higher than expected which could see many road users “caught out”.
Thomas added: “The important thing is that existing customers are protected. If you already have a Motability vehicle, nothing changes until your current lease ends. The impact comes when you return your car and start choosing your next one.”
“That is where some people could be caught out. They may have budgeted based on what they paid previously, without realising the costs have changed.”
The Motability Scheme has warned drivers ordering a vehicle that meets some new cars will meet the HMRC criteria for VAT relief. If VAT relief is available, the car dealer will ask you to complete a customer eligibility declaration.
As well as price updates, Motability customers are also facing new restrictions of up to 10,000 miles per year. Road users exceeding this would need to pay 25p per mile as part of an excess mile bill.
Motability bosses have stressed that they needed to make “careful changes to protect customers” and keep the scheme “sustainable for the long term”.