The accessible car just got more expensive: the UK’s new Motability taxes, and what Canada offers instead

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By the Living Unlimited Team

There is a British program that does something Canada has never built: it lets a person hand over a disability benefit and drive away in a new car that comes insured, serviced, taxed, and, where needed, adapted. It is called the Motability Scheme, and from 1 July 2026 it costs more to use. The change is worth understanding on its own terms, and then worth holding up against what a Canadian in the same position actually has, which is less than you might think.

What changed in the UK

In the November 2025 Autumn Budget, the UK government confirmed two tax changes that reach the Motability Scheme. The scheme’s own page states it plainly: “VAT and Insurance Premium Tax (IPT) changes will apply to leases on the Motability Scheme from 1 July 2026.”

The first is Value Added Tax. Until now, the upfront cost some customers pay for a higher-value vehicle, called the Advance Payment, was free of VAT. From July, the standard 20 per cent VAT applies to it, and to other extra charges such as excess mileage and early termination fees. VAT is not added to the weekly lease payments that come out of a customer’s mobility allowance.

The second is Insurance Premium Tax, a tax on general insurance premiums. The Motability Foundation’s summary says that from 1 July 2026 VAT and Insurance Premium Tax will apply to leases on the Motability Scheme, and Motability Operations’ media briefing of 27 November 2025 describes the change only as removal of the current exemption. Neither names a rate. HMRC sets two: a standard rate of 12 per cent, unchanged since 1 June 2017, and a higher rate of 20 per cent that covers travel insurance, appliance insurance and some vehicle insurance. HMRC published the answer with the Budget. Its policy paper of 26 November 2025 says the exemption is kept only for vehicles substantially and permanently adapted for wheelchair or stretcher users, or originally designed for their use, and that insurance on all other vehicles provided through qualifying schemes becomes liable to the standard rate of 12 per cent.

What it costs, and what stays exempt

The bill for customers is smaller than the tax alone would suggest, because Motability is covering part of it. In a question-and-answer set compiled by the Motability Foundation, the charity that oversees the scheme, and published by Disability Rights UK on 8 December 2025, the average Advance Payment was expected to rise by around £400 across a three-year lease. The no-Advance-Payment end of the range has thinned since then. That same set said the scheme would continue to offer 40 to 50 vehicles with no Advance Payment; by the July to September 2026 price list Motability Operations, the company that runs the scheme, was reporting more than 30 cars with no Advance Payment, with low Advance Payments starting from £95.

Several things do not change, and one is unresolved. The Motability Foundation says the changes apply across the UK except in Scotland, where it says it is working with Motability Operations and the Scottish Government. Most Wheelchair Accessible Vehicles, and vehicles substantially and permanently adapted for wheelchair or stretcher users, stay exempt from the VAT and IPT changes, though Motability notes that HMRC rules deny the relief to some adapted vehicles including privacy vans and safe passenger conversions. The relief is not automatic and this is the part easiest to miss: Motability says the dealer will ask the customer to complete a Customer Eligibility Declaration when ordering, confirming that they normally use a wheelchair or are carried on a stretcher. Two other things are untouched. Where a person’s disability means they need adaptations fitted in order to drive or use the car, Motability says the cost of the adaptation itself carries no VAT charge, even though the lease does. And leases of powered wheelchairs and scooters are unaffected, with no VAT charged on any payment. Existing leases are untouched. The trigger for the new rules is the date the lease starts, which Motability defines as the day the car is collected, so an order placed in June but collected in August falls under the new rules for charges such as excess mileage and early termination fees. The Advance Payment is the exception. Motability’s price freeze locks the price set at the time of application, so it does not change no matter when the car is collected. Eligibility is unchanged and is set by government, not by the scheme. Motability Operations lists the qualifying allowances as the higher rate mobility part of Personal Independence Payment, the higher rate mobility part of Disability Living Allowance, the enhanced rate mobility part of Adult Disability Payment in Scotland, the higher rate mobility component of Child Disability Payment in Scotland, the higher rate mobility component of Scottish Adult Disability Living Allowance, War Pensioners’ Mobility Supplement, and Armed Forces Independence Payment. The award must also have at least 12 months left to run. On Personal Independence Payment, Disability Living Allowance, Adult Disability Payment, Child Disability Payment and Scottish Adult Disability Living Allowance it is the top mobility rate that opens the door, not the benefit on its own. War Pensioners’ Mobility Supplement and Armed Forces Independence Payment qualify on receipt, with no rate tier. Motability Operations reports 915,000 people across the UK using the scheme, which covers cars, Wheelchair Accessible Vehicles, scooters and powered wheelchairs, so not every customer is a driver.

One related change is not a tax at all. Alfa Romeo, Audi, BMW, Lexus and Mercedes-Benz, along with all coupes and convertibles from other manufacturers, were taken off the price list by Motability Operations on 25 November 2025. The Motability Scheme’s stated reason is that these models tend to be higher-cost vehicles that sit outside the Scheme’s focus on essential, practical mobility, and that it will keep reviewing the range so it meets customers’ needs and represents the best value it can offer. A customer who wanted one of those cars has lost that option regardless of the tax.

Why this is a Canadian story too

It is tempting to file all of this under “British problem.” That misses the more uncomfortable point. The reason the UK change is a change is that the UK has the thing in the first place.

Motability is a single, national mechanism. A qualifying person exchanges the mobility part of their disability benefit for a package that bundles the car, insurance, servicing, breakdown cover and tyres, and, for those who need it, adaptations subsidized by the Motability Foundation. Canada has no federal equivalent. There is no national scheme a Canadian can join to swap a benefit for an insured, maintained, adapted car.

What Canada has instead is a patchwork, and it asks the individual to assemble it. On the cash side, the federal Canada Disability Benefit pays a maximum of $204.20 a month for the period July 2026 to June 2027, up from $200 for July 2025 to June 2026, and provincial disability programs vary widely by province. None of that is a car; it is income the recipient can spend on whatever the month demands.

On the tax side, the cost of adapting a vehicle can be recognized. The Canada Revenue Agency lists a van as an eligible medical expense on the medical expense tax credit where it has been adapted to transport someone who needs to use a wheelchair, but the claim is capped and conditional: 20 per cent of the amount paid for the van, less the cost of adapting it, to a limit of $5,000, and only where the van was already adapted or is adapted within six months after it was bought. That $5,000 is the federal limit; the guide sets the Ontario provincial limit at $8,813 for the 2025 tax year. Wheelchairs and wheelchair carriers are eligible too. Two things shape what any of it is worth. The medical expense tax credit is non-refundable, so it reduces tax owed rather than paying anything out. And the claim is not made on the full amount: the guide says you subtract the lesser of $2,834, which is the 2025 tax year figure, or 3 per cent of net income before the credit is calculated at all, so a smaller claim against a smaller income can come to nothing. A credit also arrives long after the money is spent, and only helps someone who had the money to spend in the first place. Above that sit province-by-province vehicle-modification programs that differ in what they fund and who qualifies.

Put the two systems side by side and the contrast is not really about £400. It is about who does the work. A UK claimant absorbs a modest rise and still drives away in a car that is already insured, serviced and, if needed, adapted. A Canadian with identical needs becomes their own scheme administrator: sourcing the vehicle, arranging and paying for adaptations, insuring and maintaining it, and then reclaiming a slice through tax credits and whatever provincial grant they can find. The British complaint is that an existing program got more expensive. The Canadian position is that there is no equivalent program to get more expensive.

What to take from this

If you follow disability policy on both sides of the Atlantic, the useful reflex is not envy but clarity about the design. Three things are worth holding onto.

The UK change is real but bounded: about £400 more over three years on average, wheelchair-accessible and adapted vehicles exempt, existing leases untouched, from 1 July 2026.

Canada’s support for getting a person with a disability into a suitable vehicle is not a scheme but a stack: a modest federal cash benefit, provincial programs, and tax measures that reimburse rather than provide.

And the gap between “a benefit you can turn into a car” and “credits you claim after buying one” is the whole story. It decides who can actually get on the road.

We are describing how these programs work, not giving tax or financial advice, and the figures here are the published ones at the time of writing. For what applies to you in Canada, the Canada Revenue Agency and your provincial disability program are the places to confirm the details.

Sources

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