Drivers on benefits face £400 tax hikes from July

Brits on disability benefits could face a higher bill worth hundreds more with changes set to take place. If you’re a user of the motability car leasing scheme then an increase in payments worth up to £400 at the start of the new lease is set to take place soon.

From July 1, the charges will be introduced for customers but this is not the only change that will happen. There will also be a change to mileage allowances. Charges for additional mileage and extra charges for taking motors abroad under changes have also been announced.

The scheme was hit with £300million of new taxes following last year’s budget.

It allows people receiving the higher or enhanced rate of the mobility component of disability benefits to direct some or all of their payments to lease a new car or accessible vehicle.

Around 890,000 people use the scheme but in recent times it has come under fire.

Rachel Reeves also announced the Government would introduce VAT to advance payments for the scheme, and apply insurance premium tax to leases from July 2026, reports The Sun.

Chief executive of Motability Operations, Andrew Miller, told people on the scheme that it will introduce changes to deal with the cost.

“Together, these tax changes mean it will cost significantly more to run the scheme,” he said in a letter.

“If we did nothing, the average cost of a new lease would increase by around £1,100.

“It was clear to me that simply passing all these costs on to customers was not an option.

“We had to carefully consider how to reduce the tax impact as much as possible but also, focusing on changes that reflect how most customers already use their vehicles.”