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Motability Scheme Changes 2026: What They Mean For You

Motability News

07 July 2026

The UK Government's Autumn Budget introduced tax changes that affect the Motability Scheme. Here's what's different for new leases, and what stays exactly the same.

New VAT and Insurance Premium Tax rules now apply to most new Motability leases ordered from Wednesday 1 July 2026. Motability has made a number of changes to protect customers and keep the Scheme sustainable for the long term. If you're thinking about a new lease, or you already have one, here's a clear breakdown of what's changing.

THE CHANGES AT A GLANCE

VAT & INSURANCE PREMIUM TAX

Standard rate VAT now applies to most new lease Advance Payments

MILEAGE ALLOWANCE

30,000 miles over a three year lease

TYRE REPLACEMENT

Up to six tyres included over a three-year lease

EU BREAKDOWN COVER

A VE103 certificate is now needed to travel abroad

WHAT'S CHANGED FOR NEW LEASES FROM 1 JULY 2026

These changes apply to new leases ordered on or after 1 July 2026. If your lease started before this date, none of the following affects you right now. 

VAT & INSURANCE PREMIUM TAX

  • New car Advance Payments are now shown with standard rate VAT added, currently 20%
  • Whether this affects you depends on your individual circumstances and the payments involved

Going forward, you might need to pay VAT on any Advance Payment, excess mileage charges, and early termination fees. The team at SERE Motors Belfast will walk you through exactly what applies to your chosen KGM vehicle before you order, and your confirmed price will always be set out clearly in your pre-contract agreement. 

For a lease to continue benefiting from VAT relief, you'll need to meet the criteria set out by HMRC. This applies to someone who normally uses a wheelchair or is carried on a stretcher, where the vehicle has been adapted to allow them to travel safely. This covers most wheelchair accessible vehicles (WAVs) and cars with significant adaptations that help you travel safely and independently. 

Find full details here. 

MILEAGE ALLOWANCE

  • New leases now come with an average annual mileage allowance of 10,000 miles a year, working out at 30,000 miles over a three-year lease
  • Any miles driven above the allowance are charged at the end of the lease, at 25p per mile including standard rate VAT

For context, most customers drive around 7,500 miles a year, so many drivers will still fall comfortably within the new allowance.

Motability has said it may be able to support customers with exceptional circumstances relating to healthcare, education, or employment. The application process for this is expected to be published on Wednesday 8 July 2026. 

Find out more here. 

TYRE REPLACEMENT

  • New leases include tyre replacements as standard, provided they fall within fair use
  • On a three-year lease, that's up to six tyre replacements, with up to four of those covering damage
  • On a five-year lease, that's up to ten replacements, with up to six covering damage

Most customers only need two or fewer tyre replacements over a three-year lease, so the new allowance is likely to cover typical use comfortably. If you ever need more replacements than your allowance covers, Motability has committed to explaining your options clearly and making sure you understand any costs before you decide anything.

More info is available directly from Motability. 

EU BREAKDOWN COVER

  • You'll now need a VE103 certificate before taking your vehicle outside the UK, which carries a £22 admin fee
  • You can still get this certificate through the RAC
  • Customers in Northern Ireland travelling to the Republic of Ireland will not need to pay this admin fee

A VE103 certificate confirms you have permission to take the vehicle abroad, since you're not its registered owner. Once issued, it lasts 12 months and covers all trips within that period. Fewer than 1% of customers used breakdown cover abroad in 2025, so this change will affect a small number of drivers.

Full details are available on the Motability website.

ALREADY HAVE A MOTABILITY LEASE?

Nothing changes for you. These updates only apply to new orders placed on or after 1 July 2026, so if your lease is already up and running, you can carry on exactly as normal.

WHAT HASN'T CHANGED

Whatever your lease start date, every Motability agreement still includes:

✅ Insurance for up to three drivers
✅ Servicing and maintenance

✅ Breakdown cover
✅ Dedicated support from the Motability team

EXPLORE MOTABILITY OFFERS AT SERE MOTORS

SERE Motors Belfast offers a range of KGM vehicles through the Motability Scheme. If you'd like to talk through how these changes affect your options, or you're ready to find your next Motability car, our Belfast team is here to help.

View KGM Motability Offers

Figures and rates in this article are correct at the time of publication and may be subject to change. Please contact our team or visit Motability's official website for the latest information. 

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